The following selected transactions relate to investment activities of Ornamenta
ID: 2472068 • Letter: T
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.
Received cash dividends of $8,000 on the investment in Distribution Transformers common shares.
Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are:
Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are:
Prepare the appropriate journal entry for each transaction or event during 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Indicate any amounts that Ornamental Insulation would report in its 2016 balance sheet and income statement as a result of these investments. (Amounts to be deducted should be indicated with a minus sign.)
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.
Explanation / Answer
Feb. 21 Acquired Distribution Transformers Corporation common shares
costing $560,000.
Dr Investment in Distribution shares 560,000
Cr CAsh 560,000
Mar. 18 Received cash dividends of $8,000 on the investment in
Distribution Transformers common shares
Dr Cash 8,000
Cr Investment (or Dividend) Revenue 8,000
Sep 1
Acquired $1,380,000 of American Instruments' 10% bonds at face value
Dr Investment in American bonds 1,380,000
Cr Cash 1,380,000
Oct. 20 Sold the Distribution Transformers shares for $610,000.
Dr Cash 610,000
Cr Gain on sale 50,000
Cr Investment in Distribution shares 560,000
Nov. 1 Purchased M&D Corporation shares costing $2,200,000
Dr Investment in M&D shares 2,200,000
Cr Cash 2,200,000
Dec. 31 Recorded any necessary adjusting entry(s) relating to the
investments. The market prices of investments are
American Instruments bonds ($1,380,000 cost) $1,336,000
M&D Corporation ($2,200,000 cost) $2,273,000
Dr Interest receivable (10% x 1,380,000 x 4/12) 46,000
ICr nvestment (or Interest) Revenue 46,000
Dr Fair Value Adjustment 29,000
Cr Net Unrealised Holding Gain/Loss-OCi $29,000
Part 2: Indicate any amounts that Ornamental Insulation would report on its
2016 balance sheet and income statement as a result of these investments
Sep 1
Acquired $1,380,000 of American Instruments' 10% bonds at face value
Dr Investment in American bonds 1,380,000
Cr Cash 1,380,000
Oct. 20 Sold the Distribution Transformers shares for $610,000.
Dr Cash 610,000
Cr Gain on sale 50,000
Cr Investment in Distribution shares 560,000
Nov. 1 Purchased M&D Corporation shares costing $2,200,000
Dr Investment in M&D shares 2,200,000
Cr Cash 2,200,000
Dec. 31 Recorded any necessary adjusting entry(s) relating to the
investments. The market prices of investments are
American Instruments bonds ($1,380,000 cost) $1,336,000
M&D Corporation ($2,200,000 cost) $2,273,000
Dr Interest receivable (10% x 1,380,000 x 4/12) 46,000
ICr nvestment (or Interest) Revenue 46,000
Security Cost Fair value Gain/Loss American 1,380,000.00 1,336,000.00 (44,000.00) M&D 2,200,000.00 2,273,000.00 73,000.00 Totals 3,580,000.00 3,609,000.00 29,000.00 1Related Questions
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