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 120 Grocers' Supply Corporation bonds for $420,000. 28 Received interest of $2,800 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 $450,000. 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.) View transaction list Journal entry worksheet Record the entry to adict the fair value

Answer 1

To record the transactions relating to the Grocers' Supply Corporation bonds, Rantzow-Lear would make journal entries for each transaction.

Step-by-step explanation:

To record the transactions relating to the Grocers' Supply Corporation bonds, Rantzow-Lear would make the following journal entries:

1. Dec. 17: Dr. Bonds Held for Trading (asset, valued at $4,000 per bond) for $420,000; Cr. Cash (asset) for $420,000.
2. Dec. 28: Dr. Cash (asset) for $2,800; Cr. Interest Revenue (revenue) for $2,800.
3. Dec. 31: Dr. Adjusting Entry For Unrealized Holding Loss (loss account) for $60,000; Cr. Bonds Held for Trading (asset) for $60,000.
4. Jan. 5: Dr. Cash (asset) for $450,000; Cr. Bonds Held for Trading (asset) for $420,000; Cr. Gain on Sale of Bonds (revenue) for $30,000.