ezto.mheducation.com value: 5.00 points The following selected transactions rela
ID: 2423393 • Letter: E
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ezto.mheducation.com value: 5.00 points 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 $410,000 Mar. 18 Received cash dividends of $8,500 on the investment in Distribution Transformers common shares Sep. 1 Acquired $930,000 of American Instruments' 10% bonds at face value Oct. 20 Sold the Distribution Transformers shares for $440,000 Nov. 1 Purchased M&D; Corporation common shares costing $1,450,000 Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are American Instruments bonds $ 881,000 M&D; Corporation shares$1,511,000 (Hint: Interest must be accrued for the American Instruments' bonds.) 2017 Jan. 20 Sold the M&D; Corporation shares for $1,536,000 Mar. 1 Received semiannual interest of $46,500 on the investment in American Instruments bonds Aug. 12 Acquired Vast Communication common shares costing $660,000 Sept. 1 Received semiannual interest of $46,500 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 American Instruments bonds $680,000 $861,000 Required 1. 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.)Explanation / Answer
Debit Credit February 21, 2016 Investment in Distribution transformers Corp $ 410,000 Cash $ 410,000 To record the investment in shares of Distribution transformers corp and paid cash March 18, 2016 Cash $ 8,500 Dividend income from Distribution tranformers corp $ 8,500 To record the dividend received from the investment in shares September 1, 2016 Investment in American Instruments Bonds $ 900,000 Cash $ 900,000 To record the investment in shares of American instruments 10% Bonds and paid cash October 20, 2016 Cash $ 440,000 Investment in Distribution transformers Corp $ 410,000 Gain on investment $ 30,000 To record the sale of investment and gain earned on the investment November 1, 2016 Investment in M & D corporation $ 1,450,000 Cash $ 1,450,000 To record the investment in shares of M&D corp and paid cash December 31, 2016 Investment revenue on bonds receivable $ 30,000 Investment revenue $ 30,000 Interest receivable on Bonds = 900000 x 4/12 x 10% December 31, 2016 Fair value adjustment $ 10,167 Net unrealized holdings gains and losses $ 10,167 Unrealized gain on investment = (1511000 - 1450000) x 2/12
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