Question

Rantzow-Lear Company buys and sells debt securities expecting to earn profits on short-term differences in price....

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 135 Grocers' Supply Corporation bonds for $607,500. 28 Received interest of $3,400 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 $5,000 per bond. 2019 Jan. 5 Sold the Grocers' Supply Corporation bonds for $641,250. Required: 1. Prepare the appropriate journal entry or entries for each transaction.

Homework Answers

Answer #1
Date Account titles & Explanations Debit Credit
2018
17-Dec Investment in Grocer's Supply $607,500
cash $607,500
To Record investment made in Grocer's Supply
28-Dec Cash $3,400
Interest income $3,400
To Record received fo Interest Income
31-Dec Fair value adjustment $67,500
Unrealized holding gain or loss $67,500
((5000*135)- 607500)
TO Record Year End Adjustment
2019
05-Jan Cash $641,250
Gain on sale of investment $33,750
investment in Grocer's supply $607,500
To Record Sale of Investment
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