Rantzow-Lear Company buys and sells debt securities expecting to
earn profits on short-term differences in price, and holds these
investments in its trading portfolio. The company’s fiscal year
ends on December 31. The following selected transactions relating
to Rantzow-Lear’s trading account occurred during December 2021 and
the first week of 2022.
|Dec.||17||Purchased 180 Grocers’ Supply Corporation bonds at par for $450,000.|
|28||Received interest of $5,200 from the Grocers’ Supply Corporation bonds.|
|31||Recorded any necessary adjusting entry relating to the Grocers’ Supply Corporation bonds. The market price of the bond was $3,000 per bond.|
|Jan.||5||Sold the Grocers' Supply Corporation bonds for $513,000.|
1. Prepare the appropriate journal entry or entries for each transaction.
2. Indicate any amounts that Rantzow-Lear Company would report in its 2021 balance sheet and income statement as a result of this investment.
1. The list of each transaction:
(a) December 17, 2021 - Purchased 180 Grocers' Supply Corporation bonds at par for $450,000.
(b) December 28, 2021 - Received interest of $5,200 from the Grocers' Supply Corporation bonds.
(c) December 31, 2021 - Record any necessary adjusting entry relating to the Grocers' Supply Corporation bonds on December 31. The market price of the bonds was $3,000 per bond
(d) January 5, 2022 - Record the entry to adjust fair value of the investment on date of sale.
(e) January 5, 2022 - Sold the Grocers' Supply Corporation bonds for $513,000.
|December 31, 2021|
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