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 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.

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