Question

The following selected transactions relate to investment activities of Ornamental Insulation Corporation during 2021. The company buys debt securities, intending to profit from short-term differences in price and maintaining them in an active trading portfolio. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2020.

Mar.		31		Acquired 8% Distribution Transformers Corporation bonds costing $400,000 at face value.
Sep.		1		Acquired $900,000 of American Instruments’ 10% bonds at face value.
Sep.		30		Received semiannual interest payment on the Distribution Transformers bonds.
Oct.		2		Sold the Distribution Transformers bonds for $425,000.
Nov.		1		Purchased $1,400,000 of M&D Corporation 6% bonds 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	$	850,000
M&D Corporation bonds	$	1,460,000

(Hint: Interest must be accrued.)

Required:
1. Prepare the appropriate journal entry for each transaction or event during 2021, as well as any adjusting entries necessary at year end.
2. Indicate any amounts that Ornamental Insulation would report in its 2021 income statement, 2021 statement of comprehensive income, and 12/31/2021 balance sheet as a result of these investments. Include totals for net income, comprehensive income, and retained earnings as a result of these investments.

I ONLY NEED HELP WITH THE INCOME STATEMENT. Everything in place is correct however, it says the answer is incomplete.

Prepare the appropriate journal entry for each transaction or event during 2021, as well as any adjusting entries necessary at year end. (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, 2021	Investment in bonds	400,000
		Cash		400,000
2	September 01, 2021	Investment in bonds	900,000
		Cash		900,000
3	September 30, 2021	Cash	16,000
		Interest revenue		16,000
4	October 02, 2021	Fair value adjustment	25,000
		Gain on investments (unrealized, NI)		25,000
5	October 02, 2021	Cash	425,000
		Investment in bonds		400,000
		Fair value adjustment		25,000
6	November 01, 2021	Investment in bonds	1,400,000
		Cash		1,400,000
7	December 31, 2021	Interest receivable	30,000
		Interest revenue		30,000
8	December 31, 2021	Interest receivable	14,000
		Interest revenue		14,000
9	December 31, 2021	Fair value adjustment	10,000
		Gain on investments (unrealized, NI)		10,000

Indicate any amounts that Ornamental Insulation would report in its 2021 income statement, 2021 statement of comprehensive income, and 12/31/2021 balance sheet as a result of these investments. Include totals for net income, comprehensive income, and retained earnings as a result of these investments. (Amounts to be deducted should be indicated with a minus sign.)

Income statement:
Interest revenue		$60,000
Gain on investments		35,000
Net income		$95,000
Statement of comprehensive income:
Net income		$95,000
Other comprehensive income
Comprehensive income		$95,000
Balance sheet:
Assets
Current Assets
Interest receivable		$44,000
Cash
Investments
Investment in bonds	$2,300,000
Add: Fair value adjustment	10,000	$2,310,000
Shareholders’ Equity
Retained earnings		$95,000

Answer 1

Answer :-

Income statement:
Interest revenue($16,000+$14,000+$30,000)		$60,000
Add: unrealized holding gain ($25,000+$10,000)		$35,000
Net income		$95,000
Statement of comprehensive income:
Net income		$95,000
Other comprehensive income		$0
Total		$95,000
Balance sheet:
Assets
Current Assets
Interest receivable ($30,000 + $14,000)		$44,000
cash
Investments
Investment in bonds	$2,300,000
Add: Fair value adjustment	$10,000	$2,310,000
Shareholders’ Equity
Retained earnings		$95,000