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 185 Grocers' Supply Corporation bonds for $462,500.
		28		Received interest of $5,400 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 $3,000 per bond.
2019
Jan.		5		Sold the Grocers' Supply Corporation bonds for $527,250. 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.)

Answer 1

		$	$
Date	Accounts Titles and Explanation	Debit	Credit
2018
17-Dec	Investment in Grocers' Supply corporation Bond	462,500
	Cash		462,500
28-Dec	Cash	5,400
	Interest Revenue		5,400
31-Dec	Fair Value adjustment	92,500
	Net unrealized holding gains and losses-I/S		92,500
2019
5-Jan	Cash	527,250
	Investment in Grocers' Supply corporation Bond		462,500
	Gain on Investment		64,750
31-Dec	Net unrealized holding gains and losses-I/S	92,500
	Fair Value Adjustment		92,500