Question
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
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 $510,000. | ||
Sep. | 1 | Acquired $1,065,000 of American Instruments' common stock. | ||
Sep. | 30 | Received a $20,400 dividend on the Distribution Transformers common stock. | ||
Oct. | 2 | Sold the Distribution Transformers common stock for $546,000. | ||
Nov. | 1 | Purchased $1,510,000 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 | $ | 1,004,000 | |
M&D Corporation common stock | $ | 1,581,000 | |
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.
No Date General Journal Debit Credit 510,000 1 March 31, 2018 Investment in Distribution Transformers stock 510,000 Cash September 01, 201 Investment in American Instruments stock 2 1,065,000 Cash 1,065,000 September 30, 201 Cash 3 20,400 Investment in Distribution Transformers stock 20,400 4 October 02, 2018 Cash 36,000 Gain on sale of investments 36,000 October 02, 2018 5 Cash 546,000 Investment in Distribution Transformers stock 546,000 November 01, 201 Investment in M&D Corporation stock 1,510,000 6 Cash 1,510,000 December 31, 201 Fair value adjustment 7 10,000 Unrealized holding loss-OCI 10,000 LO Income statement: Gain on sale of investments 36,000 $ 36,000 Statement of comprehensive income: Net income 10,000 Balance sheet Assets Current Assets $ 2,575,000 Trading securities amortized cost $ 2,585,000 Add: Fair value adjustment 10,000 Shareholders' Equity Unrealized holding gain on investments held 10,000 SAStep by Step Solution
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