Question

Rantzow-Lear Company buys and sells debt securities expecting to earn profits on short-term differences in price. The company’s fiscal year ends on December 31. The following selected transactions relating to Rantzow-Lear’s trading account occurred during December 2018 and the first week of 2019. 2018 Dec. 17 Purchased 165 Grocers' Supply Corporation bonds for $577,500. 28 Received interest of $4,600 from the Grocers’ Supply Corporation bonds. 31 Recorded any necessary adjusting entry relating to the Grocers' Supply Corporation bonds. The market price of the bonds were $4,000 per bond. 2019 Jan. 5 Sold the Grocers' Supply Corporation bonds for $643,500. Required: 1. Prepare the appropriate journal entry or entries for each transaction. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Date	Accounts Titles and Explanation	Debit	Credit
17-Dec-18	Invest in Grocers’ Supply Bond	$577,500
	Cash.		$577,500
28-Dec-18	Cash	$4,600
	Interest Revenue		$4,600
31-Dec-18	Fair Value Adjustment	$82,500
	Net Unrealized holding gain/loss		$82,500
	[165 x ($4,000-$3,500)]
5-Jan-19	Cash	$643,500
	Fair Value Adjustment	$66,000
	Investment in Grocers’ Supply Preferred shares		$577,500
31-Dec-19	Net Unrealized holding gain/loss	$16,500
	Fair Value Adjustment		$16,500