( This problem is a variation of P 12–5, modified

( This problem is a variation of P 12–5, modified to categorize the investments as securities available-for-sale.)
The following selected transactions relate to investment activities of Ornamental Insulation during 2021. The company buys debt 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 in years when circumstances warrant. Ornamental’s fiscal year ends on December 31. No investments were held by Ornamental on December 31, 2020.

Mar. 31 Acquired 8% Transformers 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 Transformers bonds.
Oct. 2 Sold the Transformers bonds for $425,000.
Nov. 1 Purchased $1,400,000 of M&D 6% bonds costing at face value.
Dec. 31 Recorded any necessary adjusting entry(s) relating to the investments. The market prices of the investments are:
American Instruments bonds …………$ 850,000
M&D bonds ………………$1,460,000

1. Prepare the appropriate journal entry for each transaction or event during 2021, as well as any adjusting entries necessary at year-end. For any sales, prepare entries to update the fair-value adjustment, record any reclassification adjustment, and record the sale.
2. Indicate any amounts that Ornamental Insulation would report in its 2021 income statement, 2021 statement of comprehensive income, and 12/31/2021 as a result of these investments. Include totals for net income, comprehensive income, and retained earnings as a result of these investments.

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