Problem 12-7 (Algo) Various transactions related to equity investments: fair value through net income [LO12-5) The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2021. The company buys equity securities as noncurrent investments. None of Ornamentals investments are large enough to exert significant influence on the investee. Ornamental's fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2020. Mar. 31 Acquired Distribution Transformers Corporation common stock for $410,000. Sep. 1 Acquired $915,000 of American Instruments' common stock. Sep. 30 Received a $10,250 dividend on the Distribution Transformers common stock. Oct. 2 Sold the Distribution Transformers common stock for $436,000. Nov. 1 Purchased $1,410,000 of M&D Corporation common stock. Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are: American Instruments common stock M&D Corporation common stock $ 864,000 $1,471,000 Required: 1. Prepare the appropriate journal entry for each transaction or event during 2021, as well as any adjusting entries necessary at year- end. 2. Indicate any amounts that Ornamental Insulation would report in its 2021 income statement, 2021 statement of comprehensive income, and 12/31/2021 balance sheet as a result of these investments. Include totals for net income, comprehensive income, and retained earnings as a result of these investments. Credit No 1 Date March 31, 2021 General Journal Investment in equity securities Cash Debit 410,000 410.000 September 01, 20 Investment in equity securities 915.000 Cash 915.000 10.250 September 30, 20. Cash Dividend revenue 10.250 26.000 October 02. 2021 Fair value adjustment Gain on investments (unrealized, NI) 26.000 5 436.000 October 02, 2021 Cash Fair value adjustment Investment in equity securities 26.000 410.000 6 November 01, 202 Investment in equity securities 1,410,000 Cash 1.410.000 20.000 December 31, 202 Fair value adjustment Gain on investments (unrealized, NI) (unrealized, NI) 20,000 Indicate any amounts that Ornamental Insulation would report in its 2021 income statement, 2021 statement of comprehensive income, and 12/31/2021 balance sheet as a result of these investments. Include totals for net income, comprehensive income, and retained earnings as a result of these investments. Income statement: $ 10.250 28.000 36.250 36,250 X Dividend revenue Gain on investments Net income Statement of comprehensive income: Net income Other comprehensive income Comprehensive income Balance sheet: Assets Current Assets Noncurrent Assets Investments in equity securities Add: Fair value adjustment Shareholders' Equity Other comprehensive income $2.325,000 20.000 $ 2,345.000 $ 20,000
