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

Question

antzow-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.

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.)

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.

Explanation / Answer

Ant-zow Lear Company

Date

Account Titles and Explanation

Debit

Credit

17-Dec-18

Investment in Grocers' Bonds

$350,000

Cash

$350,000

(To record purchase of 100 Grocers' bonds at par)

28-Dec-18

Cash

$2,000

Investment (Interest) Revenue

$2,000

(To record interest received from Grocers')

31-Dec-18

Fair Value Adjustment

$50,000

Unrealized Holding Gain (L/S)

$50,000

(to record adjustment for fair value of bonds - 100 x (4,000 -3,500))

5-Jan-19

Cash

$395,000

Fair Value Adjustment

$45,000

Investment in Grocers' Bonds

$350,000

(To record sale of Grocers' bonds and the difference, 395,000 - 350,000 = $45,000)

Unrealized Holding Gain)

$5,000

Fair Value Adjustment

$5,000

                                                                        

Note:

Fair value adjustment –

$50,000 - $45,000 = $5,000

Date

Account Titles and Explanation

Debit

Credit

17-Dec-18

Investment in Grocers' Bonds

$350,000

Cash

$350,000

(To record purchase of 100 Grocers' bonds at par)

28-Dec-18

Cash

$2,000

Investment (Interest) Revenue

$2,000

(To record interest received from Grocers')

31-Dec-18

Fair Value Adjustment

$50,000

Unrealized Holding Gain (L/S)

$50,000

(to record adjustment for fair value of bonds - 100 x (4,000 -3,500))

5-Jan-19

Cash

$395,000

Fair Value Adjustment

$45,000

Investment in Grocers' Bonds

$350,000

(To record sale of Grocers' bonds and the difference, 395,000 - 350,000 = $45,000)

Unrealized Holding Gain)

$5,000

Fair Value Adjustment

$5,000

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

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