Problem 12-7 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 2018. The company buys equity securities as investments. None of Ornamentals investments are large enough to exert significant influence on the investee. Ornamentals fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2017.

Mar. 31 Acquired Distribution Transformers Corporation common stock for $420,000.

Sep. 1 Acquired $930,000 of American Instruments' common stock.

Sep. 30 Received a $16,800 dividend on the Distribution Transformers common stock.

Oct. 2 Sold the Distribution Transformers common stock for $447,000.

Nov. 1 Purchased $1,420,000 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 $ 878,000

M&D Corporation common stock $ 1,482,000

Required:

1. Prepare the appropriate journal entry for each transaction or event during 2018, as well as any adjusting entries necessary at year end.

2. Indicate any amounts that Ornamental Insulation would report in its 2018 income statement, 2018 statement of comprehensive income, and 12/31/2018 balance sheet as a result of these investments.

Screen Shot 2018-03-21 at 20.01.04 Open with Preview September 30, 2018 Cash 16,800 Investment revenue 16,800 October 02, Fair value adjustment 2018 927,000 Unrealized holding gainNI 27,000 October 02, Cash 447,000 0 420,0000 2018 Investment in Distribution Transformers stock Fair value adjustment 27,000 November 01, 2018 Investment in M&D Corporation stock 1.420,000 Cash 1.420,000 December 31, 2018 62.000 Fair value adjustment Unrealized holding gainOCI 62,000