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.

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.)

2. Indicate any amounts that Rantzow-Lear Company would report in its 2018 balance sheet and income statement as a result of this investment.

2018
Dec.		17		Purchased 160 Grocers' Supply Corporation bonds for $560,000.
		28		Received interest of $4,400 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 $4,000 per bond.
2019
Jan.		5		Sold the Grocers' Supply Corporation bonds for $624,000.

Answer 1

PageNo 0 Anghen: The appropriate Journal entry for Each tranfaction Date Accounts title Debit Coredit if - Decl Investment ingrocer Bondę $560,000 $560,000 I cash. Kbeing intoredt made) Dec-81 2018 / cash $4,400 intreat. Revenue $41400 Dec-31 fair value adjustment $80,000 2019 $80,000 unoualized Holding Gain (4000x (60) - 560,000 --640000 - 560,000 = 80,000 Jan 52019 un realized Holding Grain $16,000 Fair value adjustment $ 16,000 (80,000-6624000-5601 : = (80000 -64000).000 cash $ 624.000 $ 64,000 faior value adiuftment $ 560,000 Investiment in Grour Bonds

Page na a) Income statement :- Income Statement Interest finustment Ravenue) / $4,400 lunoualized Holding Gain $80,000 Balance sheet: Balance Sheet Trading securities 4640,000 C6560.000 + 8014