Sooner Company holds debt and equity securities as investments. The companys year-end is December 31. Sooner records adjusting entries, including the fair value adjustment, at year-end. Sooners December 31, 2015, balance sheet included the following information:

Current assets

Investment in trading securities (Longhorn stock) $37,000

Long-term investments

Investment in AFS securities (Tiger stock) $20,000

Fair value adjustment-AFS ( 2,000)

$18,000

Shareholders equity

Retained earnings 30,000

Accumulated OCI (2,000)

Part 1-Record the 2016 transactions below in journal entries or T-accounts.

On March 1, Sooner received $1,500 in dividends from the Longhorn Company

On June 1, Sooner sold the Longhorn stock for $40,000.

On July 1, Sooner purchased $50,000 of Cowboy Companys 8% bonds at a price that yields 10%. The bonds mature on July 1, 2017 and pay interest semiannually on June 30 and December 31. Sooner intends to hold this investment to maturity and uses the effective interest method. Hint: you will need to compute the price of the bonds.

On October 1, Sooner purchased $100,000 of Cornhusker Companys 12% bonds at face value. The bonds mature in 10 years and pay interest semiannually on March 31 and September 30. The bonds will be held available for sale as circumstances warrant.

On November 1, Sooner purchased Red Raider common stock for $23,000, holding the stock in an active trading account.

On December 31, Sooner received $2,000 in interest on the Cowboy bonds and recorded interest revenue using the effective interest method.

On December 31, 2016, Sooner recorded adjusting entries for accrued interest revenue and the fair value adjustment. (Hint: For investments in AFS securities, be sure to consider the 12-31-15 balance in the Fair Value Adjustment account when determining the amount of unrealized gain/loss for 2015.)

Year-end market values were:

Tiger Corporation common stock $16,000 Cowboy Company bonds $ 44,000

Red Raider common stock. $25,000 Cornhusker Company bonds $105,000

Part 2: Determine the amounts reported for (a) 2016 for net income and comprehensive income, (b) investment-related assets on the 2016 balance sheet, and (c) retained earnings and accumulated OCI on the 2016 balance sheet. Ignore income taxes. 2016 income from operations (without investment-related items) is $25,000.