Question
The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2018. The company buys debt securities, intending to profit from short-term differences
The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2018. The company buys debt securities, intending to profit from short-term differences in price and maintaining them in an active trading portfolio. Ornamentals fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2017.
Mar. | 31 | Acquired 8% Distribution Transformers Corporation bonds costing $530,000 at face value. | ||
Sep. | 1 | Acquired $1,290,000 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 $565,000. | ||
Nov. | 1 | Purchased $2,050,000 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 | $ | 1,243,000 | |
M&D Corporation bonds | $ | 2,123,000 | |
(Hint: Interest must be accrued.) 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.
I don't have a net unrealized gain option, but I just need help filling out the rest of my second requirement
Date General Journal Debit Credit 1 March 31, 2018 Investment in Distribution Transformers bonds 530,000 Cash 530,000 September 01 2018 1,290,000 Investment in American Instruments bonds Cash 1,290,000 September 30 2018 Cash 21,200 Interest revenue 21,200 4 October 02, 2018 Fair value adjustment 35,000 Unrealized holding gain-NI 35,000 5 October 02, 2018Cash 565,000 Investment in Distribution Transformers bonds 530,000 35,000 Fair value adjustment November 01 2018 Investment in M&D Corporation bonds 2,050,000 Cash 2,050,000 December 31 2018 Interest receivable 43,000 Interest revenue 43,000 December 31 2018 Interest receivable 20,500 Interest revenue 20,500 December 31, Fair value adjustment 26,000 2018 Unrealized holding gain-NI 26,000 Required 1Required 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. (Amounts to be deducted should be indicated with a minus sign.) Income statement Interest revenue 84,700 61,000 $ 145,700 $ 145,700 Gain on trading securities Net income Statement of comprehensive income Net income Balance sheet: Assets Current Assets Interest receivable 63,500 Investments $ 3,340,000 Trading securities - amortized cost Add: Fair value adjustment 26,000 $ 3,366,000 Shareholders' EquityStep by Step Solution
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