Question

Rantzow-Lear Company buys and sells debt securities expecting to earn profits on short-term differences in price, and holds these investments in its trading portfolio. The company's fiscal year ends on December 31. The following selected transactions relating to Rantzow-Lear's trading account occurred during December 2021 and the first week of 2022. 2021 Dec. 17 Purchased 200 Grocers' Supply Corporation bonds at par for $500,000. 28 Received interest of $6,000 from the Grocers' Supply Corporation bonds. 31 Recorded any necessary adjusting entry relating to the Grocers' Supply Corporation bonds. The market price of the bond was $3,000 per bond. 2022 Jan. 5 sold the Grocers' Supply Corporation bonds for $560,000. Required: 1. Prepare the appropriate journal entry or entries for each transaction. 2. Indicate any amounts that Rantzow-Lear Company would report in its 2021 balance sheet and income statement as a result of this investment. Complete this question by entering your answers in the tabs below. Required Required 2 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.) Show less View transaction list Journal entry worksheet < 3 4 5 > Record any necessary adjusting entry relating to the Grocers' Supply Corporation bonds on December 31. The market price of the bonds was $3,000 per bond. Note: Enter debits before credits. General Journal Debit Credit Date December 31, 2021 Record entry View general journal Clear entry

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Answer 1

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Required 2 Debit Credit Balance Sheet Required 1 Journal Entries Date General Journal Fair Value adjustment Dec 31,2021 ((200 bonds*$3,000) - $500,000) Unrealized Holding Gain - NI (To record adjustment to tarding securities at Fair market value) $ 100,000 As of year ended December 31, 2021 Current Assets $ 100,000 Purchase Value $ 500,000 Less : Fair value adjustment $ 100,000 $400,000 Unrealized Holding Gain Jan 05,2022 ($100,000 - ($560,000 - $500,000) $ 40,000 Fair value adjustment (To record Fair value on date of sale) $ 40,000 $ 560,000 Jan 05,2022 Cash Fair value adjustment Invetsment in Bonds (To record sale of bonds) Income Statement For the year ended December 31, 2021 Revenue Interest Revenue $ 6,000 Unrealized Holding Gain $ 100,000 $ 106,000 $ 60,000 $ 500,000