Question

The following selected transactions relate to investment activities of Ornamental Insulation Corporation. The company buys 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, 2015. 2016 Feb. 21 Acquired Distribution Transformers Corporation common shares costing $530,000. Mar. 18 Received cash dividends of $10,000 on the investment in Distribution Transformers common shares. Sep. 1 Acquired $1,290,000 of American Instruments' 10% bonds at face value. Oct. 20 Sold the Distribution Transformers shares for $565,000. Nov. 1 Purchased M&D Corporation common shares costing $2,050,000. 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 shares $ 2,123,000 (Hint: Interest must be accrued for the American Instruments’ bonds.) 2017 Jan. 20 Sold the M&D Corporation shares for $2,148,000. Mar. 1 Received semiannual interest of $64,500 on the investment in American Instruments bonds. Aug. 12 Acquired Vast Communication common shares costing $780,000. Sept. 1 Received semiannual interest of $64,500 on the investment in American Instruments bonds. Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are: Vast Communication shares $ 800,000 American Instruments bonds $ 1,223,000 Required: 1. Prepare the appropriate journal entry for each transaction or event during 2016. 2. Indicate any amounts that Ornamental Insulation would report in its 2016 balance sheet and income statement as a result of these investments. 3. Prepare the appropriate journal entry for each transaction or event during 2017. 4. Indicate any amounts that Ornamental Insulation would report in its 2017 balance sheet and income statement as a result of these investments.

Answer 1

Please note the within the given time, I could complete only two parts. The other two parts would be similar to the given parts.

1.

Below is the items to be reported in the balance sheet:

Partial Balance Sheet
As at Dec 31st, 2016
Investments:
Investment in M&D Corporation Shares	$2,123,000.00
Investment in American Instruments 10% bonds	$1,243,000.00
Total Investments	$3,366,000.00

Below are the items partial income statement:

Partial Income Statement
For the year ended Dec 31, 2016
Other non-operating income:
Interest income	$43,000.00
Total interest income	$43,000.00
Other comprehensive incomes/ (losses):
Gain on revaluation of investment	$73,000.00
Loss on revaluation of bonds	($47,000.00)
Total Other comprehensive income	$26,000.00

2.

Below are the required journal entries:

General Journal
Date	Account title & Explanation	#Ref	Debit	Credit
2016
21-Feb	Investment in Distribution Transformers Corporation		$530,000.00
	Cash			$530,000.00
	(To record investment in shares)
18-Mar	Cash		$10,000.00
	Dividend Income			$10,000.00
	(TO record dividend income from investments)
1-Sep	Investment in American Instruments 10% bonds		$1,290,000.00
	Cash			$1,290,000.00
	(To record investment in bonds)
20-Oct	Cash		$565,000.00
	Investment in Distribution Transformers Corporation			$530,000.00
	Gain on sale of investment			$35,000.00
	(To record sale of investment and profit thereof)
1-Nov	Investment in M&D Corporation Shares		$2,050,000.00
	Cash			$2,050,000.00
	(To record investment in shares)
31-Dec	Loss on revaluation of bonds		$47,000.00
	Investment in American Instruments 10% bonds			$47,000.00
	(To record the adjustment for marking to market)
31-Dec	Interest receivable on bonds		$43,000.00
	Interest income			$43,000.00
	(To record interest receivable from bonds)
31-Dec	Investment in M&D Corporation Shares		$73,000.00
	Gain on revaluation of investment			$73,000.00
	(To record adjustment marking to market the investments)