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The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2021. The company...

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 Ornamental on December 31, 2020.

Mar. 31 Acquired 8% Distribution Transformers Corporation bonds costing $590,000 at face value.
Sep. 1 Acquired $1,470,000 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 $655,000.
Nov. 1 Purchased $2,350,000 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 $ 1,429,000
M&D Corporation bonds $ 2,429,000

(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.

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Part 1
No Date General Journal Debit Credit
                1 Mar 31 Investment in Distribution Transformers Bond $      590,000
     Cash $       590,000
(To record investment in bonds)
                2 Sep 1 Investment in American Instruments Bond $ 1,470,000
     Cash $   1,470,000
(To record investment in bonds)
                3 Sep 30 Cash $        23,600
     Interest Revenue ($590,000*8%*6/12) $         23,600
(To record interest received from bonds)
                4 Oct 2 Cash $      655,000
     Gain on sale of investment $         65,000
     Investment in Distribution Transformers Bond $       590,000
(To record gain in sale of bonds)
                5 Nov 1 Investment in M&D Corporation Bond $ 2,350,000
     Cash $   2,350,000
(To record investment in bonds)
                6 Dec 31 Interest Receivable $        49,000
     Interest Revenue ($1,470,000*10%*4/12) $         49,000
(To record interest accured on American Bonds)
Dec 31 Interest Receivable $        23,500
     Interest Revenue ($2,350,000*6%*2/12) $         23,500
(To record interest accured on M&D Corporation)
Dec 31 Fair value adjustment $        38,000
     Net unrealized Holding gain/Loss (OCI) $         38,000
(To record fair value adjustments)
Accumulated Unrealized
Available for Sale Securities Cost Fair Value Gain/(Losses)
American Instruments $ 1,470,000 $   1,429,000 $                            -41,000
M&D Corporation $ 2,350,000 $   2,429,000 $                              79,000
Total $ 3,820,000 $   3,858,000 $                              38,000
Part 2 Income Statement:
Interest Revenue ($23,500+$49,000+$23,500) $         96,100
Gain on sale of Investment $         65,000
Statement of Comprehensive Income:
Net unrealized Holding gain/Loss on investment $         38,000
Balance Sheet:
Assets
Current assets:
Interest revenue Receivable ($49,000+$23,500) $         72,500
Securities available for sale $ 3,820,000
Add: Fair value adjustment $        38,000 $   3,858,000
Shareholder's Equity
Accumulated Other comprehensive income
Net unrealized Holding gain/Loss on investment $         38,000

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