Question

The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2018. 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 when circumstances warrant. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2017.

Mar.		31		Acquired 6% Distribution Transformers Corporation bonds costing $580,000 at face value.
Sep.		1		Acquired $1,170,000 of American Instruments’ 8% bonds at face value.
Sep.		30		Received semiannual interest payment on the Distribution Transformers bonds.
Oct.		2		Sold the Distribution Transformers bonds for $623,000.
Nov.		1		Purchased $1,590,000 of M&D Corporation 4% bonds costing 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	$	1,102,000
M&D Corporation bonds	$	1,670,000

(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. For any sales, prepare entries to update the fair-value adjustment, record any reclassification adjustment, and record the sale.
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.

Prepare the appropriate journal entry for each transaction or event during 2018, 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, 2018	Investment in Distribution Transformers bonds	580,000
		Cash		580,000
2	September 01, 2018	Investment in American Instruments bonds	1,170,000
		Cash		1,170,000
3	September 30, 2018	Cash	17,400
		Interest revenue		17,400
4	October 02, 2018	Fair value adjustment	?????
		Unrealized holding gain—OCI		????
5	October 02, 2018	No Transaction Recorded	????

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: $0 Statement of comprehensive income: 0 Balance sheet: Assets Current Assets Investments $0 Shareholders’ Equity Accumulated other comprehensive income

Answer 1