Question
The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2021. The company buys debt securities, not intending to profit from short-term
The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2021. The company buys debt securities, not intending to profit from short-term differences in price and not necessarily to hold debt securities to maturity, but to have them available for sale in years when circumstances warrant. Ornamentals fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2020.
Mar. 31 Acquired 8% Distribution Transformers Corporation bonds costing $570,000 at face value.
Sep. 1 Acquired $1,155,000 of American Instruments 10% bonds at face value.
Sep. 30 Received semiannual interest payment on the Distribution Transformers bonds.
Oct. 2 Sold the Distribution Transformers bonds for $612,000.
Nov. 1 Purchased $1,570,000 of M&D Corporation 6% bonds at face value.
Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are: American Instruments bonds $ 1,088,000 M&D Corporation bonds $ 1,649,000 (Hint: Interest must be accrued.)
Required: 1. Prepare the appropriate journal entry for each transaction or event during 2021, as well as any adjusting entries necessary at year end. For any sales, prepare entries to update the fair-value adjustment, record any reclassification adjustment, and record the sale.
Prepare the appropriate journal entry for each transaction or event during 2021, as well as any adjusting entries necessary at year end. For any sales, prepare entries to update the fair-value adjustment, record any reclassification adjustment, and record the sale. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
No | Date | General Journal | Debit | Credit |
---|---|---|---|---|
1 | March 31, 2021 | Investment in bondsselected answer correct | 570,000selected answer correct | not attempted |
not attempted | not attempted | 570,000selected answer correct | ||
2 | September 01, 2021 | Investment in bondsselected answer correct | 1,155,000selected answer correct | not attempted |
Cashselected answer correct | not attempted | 1,155,000selected answer correct | ||
3 | September 30, 2021 | Cashselected answer correct | 22,800selected answer correct | not attempted |
Interest revenueselected answer correct | not attempted | 22,800selected answer correct | ||
4 | October 02, 2021 | Reclassification adjustment (OCI)selected answer incorrect | 612,000selected answer incorrect | not attempted |
Reclassification adjustment (OCI)selected answer incorrect | not attempted | 42,000selected answer correct | ||
Fair value adjustmentselected answer incorrect | not attempted | 570,000selected answer incorrect | ||
5 | October 02, 2021 | No Transaction Recorded | ||
6 | October 02, 2021 | Cashselected answer correct | 612,000selected answer correct | not attempted |
Gain on investments (NI)selected answer correct | not attempted | 42,000selected answer correct | ||
Investment in bondsselected answer correct | not attempted | 570,000selected answer correct | ||
7 | November 01, 2021 | Investment in bondsselected answer correct | 1,570,000selected answer correct | not attempted |
Cashselected answer correct | not attempted | 1,570,000selected answer correct | ||
8 | December 31, 2021 | Investment in bondsselected answer incorrect | 79,000selected answer incorrect | not attempted |
Fair value adjustmentselected answer incorrect | not attempted | 12,000selected answer incorrect | ||
Investment in bondsselected answer incorrect | not attempted | 67,000selected answer incorrect | ||
9 | December 31, 2021 | Interest receivableselected answer correct | 12,000selected answer incorrect | not attempted |
Interest revenueselected answer correct | not attempted | 12,000selected answer incorrect | ||
10 | December 31, 2021 | Fair value adjustmentselected answer correct | 54,200selected answer incorrect | not attempted |
Interest revenueselected answer incorrect | not attempted | 54,200selected answer incorrect |
- Required 1
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.
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. (Amounts to be deducted should be indicated with a minus sign.)
|
- Required 1
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