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 180 Grocers' Supply Corporation bonds 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 bonds were $3,000 per bond. 2019 Jan. 5 sold the Grocers' Supply Corporation bonds for $513,000. 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.) Credit Answer is not complete. General Journal December 17, 2016 Investment in Grocers' Supply bonds Cash Debit 450.000 1 450,000 2 5,200 December 28, 2016 Cash Investment revenue 5,200 90,000 December 31, 2018 Fair value adjustment Unrealized holding gain-NI 90,000 513,000 January 05, 2019 Cash Gain on investments Investment in Grocers' Supply bonds 63,000 450,000 January 05, 2019 NI 90,000 $ Unrealized holding gain Fair value adjustment 90,000

Answer 1

Credit No. Date General Journal 1 December 17, 2018 Investment in Grocer's Supply bonds Debit 4,50,000 Cash 4,50,000 5,200 5,200 90,000 90,000 2 December 28, 2018 Cash Investment Revenue 3 December 31, 2018 Fai value adjustment Unrealized holding gain-NI (($3,000 X 180) -450,000) 4 January 05, 2019 Cash Gain on investment ($513,000 - 450,000) Investment in Grocer's Supply bonds 5 January 05, 2019 Unrealized holding gain- NI Fai value adjustment 5,13,000 63.000 4,50,000 90,000 90,000

Balance Sheet (Short-term investment): Trading security ($3,000 X 180) 5.40.000 Income Statement: Investment revenue (Interest) Unrealized holding gain- NI 5,200 90,000