Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2021. The company buys debt securities, intending to profit from short-term differences

image text in transcribed
image text in transcribed
The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2021. The company buys debt securities, intending to profit from short-term differences in price and maintaining them in an active trading portfolio. Ornamental's fiscal year ends on December 31. No investments were held by Omamental on December 31, 2020. Mar. 31 Acquired 8% Distribution Transformers Corporation bonds costing $520,000 at face value. $1,260,000 of American Instruments' 10% bonds at face value. Sep. 1 Acquired Sep. 30 Received semiannual interest payment on the Distribution Transformers bonds, Oct. 2 Sold the Distribution Transformers bonds for $550,000. Nov. 1 Purchased $2,000,000 of MSD 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 H&D Corporation bonds $1,212,000 $2,072,000 (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. 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 Income statement: Interest revenue Gain on investments Net income Statement of comprehensive income: Not income Comprehensive income Assets Interest receivable Investment in bonds Add: Fair value adjustment Balance sheet: Current Assets investments Shareholders Equity 72,000 30,000 102,000 24,000 24,000 42,000 24,000 $3.264,000 $ $ 3.200.000 $ $ $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions