Rantzow-Lear Company buys and sells debt securities expecting to earn profits on

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 110 Grocers' Supply Corporation bonds for $385,000.

28 Received interest of $2,400 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 $418,000.

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.)

Explanation / Answer

Journal

Date Account Name Debit Credit 2018 Dec 17 Trading securities $385000 Cash $385000 (To record investment in Grocers' Supply Corporation Bonds) Dec 28 Cash $2400 Interest income $2400 (To record interest income on bond investment) Dec 31 Trading securities $55000 Unrealized gain on Trading securities [(110 x $4000)- $385000] $55000 (To record unrealized gain on bonds) 2019 Jan 5 Cash 418000 Realized loss on trading securities 22000 Trading securities 440000 (To record sale of bonds)

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.