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 100 Grocers' Supply Corporation bonds at par for $350,000.
		28		Received interest of $2,000 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 $395,000.

Required:
1. Prepare the appropriate journal entry or entries for each transaction.

Answer 1

Bond investment is fixed income securities that issuing company has to pay the interest to bondholder of the company. The rate and amount of interest is fixed. when the investment is made in the bond the investment in bond is debited and cash will be credited.When interest received as income, then cash will be debited and interest revenue will be credited.