Question

The following selected transactions relate to investment activities of Omamental Insulation Corporation during 2021. The company buys equity securities as noncurrent investments. None of Omamental's Investments are large enough to exert significant influence on the investee. Omamental's fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2020 Mar. 31 Mare Distribution Transformers Corporatio n for $40. Sep. 1 equired 60,000 of American Internal como stock. Sep. 5 Received a $15.400 dividend on the Distribution Transformer como stock. Det. 2 Bold the Distribution Transformers come stock for ,000. No. Purchased 01.040,000 o Corporation Dec. 31 Recorded any ry adjust tries relating to the investments erine MD Corporation Rock . echt Required 2. Prepare the appropriate journal entry for 2. Indicate any amoures that Ornamental Insulation Income, and a2021 balance sheet as a result of retained earings as a result of these investments touring 2021, as well as any austing entries necessary at year, 021 income statement 2021 statement of comprehensive Include toals for net income, comprehensive income, and

Answer 1

Please find below table useful to compute desired results: -

C D 1 Credit Debit 440000 E G H Calculation of Unrealized gain stocks cost Market Price Unrealized gain/loss American Instruments common stock =C6 9 06000 -H3-G3 M&D corporation common stock =C16 1504000 =H4-G4 Unrealized gain on holding investment =14+13 4 440000 960000 960000 15400 15400 А Journal Entry 2 Date Titles and Explanation 3 Mar 31 Investment in Transformers Corporation Common Stock Bank (to record investment in common stock) Sep. 1 Investment in American Instruments' Common Stock Bank (to record investment in American instrument common stock) 9 Sep 30 Bank 10 Dividend Revenue 11 (to record dividend from transformer corporation) 12 Oct. 2 Bank 13 Investment in Transformers Corporation Common Stock Profit on sale of investment (to record selling of common stock) 16 Nov. 1 Investment in M&D Corporation common stock 17 Bank 18 (to record investment in M&D Corporation common stock) 19 Dec. 31 Fair Value of Adjustment Unrealized gain on holding investment (to record unrealized gain) Omamental Insulation Income Statement for the year ended 2021 Particulars Dividend Revenue Profit on sale of investment Net income Amount =D10 =D14 =G11-G12 469000 =C12-D13 15 1440000 1440000 Omamental Insulation statement of Comprehensive Income for the year ended 2021 Particulars Amount Unrealized gain on holding Investment =15 OTS =C19 Omamental Insulation Balance sheet: for the year ended 2021 Assets Current Assets Investments Trading securities - amortized cost Shareholders' Equity Retained earnings - unrealized gain =H3+H4 =D20

End results would be as follows: -

1 Unrealized gain loss (54,000) 64.000 10,000 5 A Journal Entry 2 Date Titles and Explanation 3 Mar 31 | Investment in Transformers Corporation Common Stock 4 Bank (to record investment in common stock) 6 Sep. 1 Investment in American Instruments' Common Stock Bank 8 (to record investment in American instrument common stock 9 Sep 30 Bank 10 Dividend Revenue 11 (to record dividend from transformer corporation) 12 Oct. 2 Bank 13 Investment in Transformers Corporation Common Stock 14 Profit on sale of investment 15 (to record selling of common stock) 16 Nov. 1 Investment in M&D Corporation common stock Bank 18 (to record investment in M&D Corporation common stock) 19 Dec. 31 Fair Value of Adjustment Unrealized gain on holding investment (to record unrealized gain) C D E Calculation of Unrealized gain Debit Credit | stocks cost Market Price 440,000 | American Instruments common stock 960,000 906.000 440,000 || M&D corporation common stock 1,440,000 1,504,000 Unrealized gain on holding investment 960,000 960,000 Omamental Insulation Income Statement 15,400 for the year ended 2021 15.400 || Particulars Amount Dividend Revenue 15,400 469,000 Profit on sale of investment 29,000 440,000 Net income 44,400 29,000 Omamental Insulation 1,440,000 statement of Comprehensive Income | 1,440,000 for the year ended 2021 Particulars Amount 10,000 Unrealized gain on holding Investment 10,000 10,000 Omamental Insulation Balance sheet: for the year ended 2021 Assets Current Assets Investments Trading securities - amortized cost 2,410,000 Shareholders' Equity Retained earnings - unrealized gain 10,000 17