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Rantzow-Lear Company buys and sells debt securities expecting to earn profits on short-term differences inprice. 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 2019.2018Dec.17Purchased 165 Grocers' Supply Corporation bonds for $577,500.28Received interest of $4,600 from the Grocers’ Supply Corporation bonds.31Recorded any necessary adjusting entry relating to the Grocers' Supply Corporation bonds. The market price of the bonds were $4,000 per bond.2019Jan. 5Sold the Grocers' Supply Corporation bonds for $643,500.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.)2.Indicate any amounts that Rantzow-Lear Company would report in its 2018 balance sheet and income statement as a result of this investment.

Respuesta :

Answer:

1.) Accounting entries

On December 17, 2018:  

Investment in Bonds  $577,500.28  

        Cash                        $577,500.28  

 

On December 28, 2018:  

Cash $4,600  

     Interest Revenue  $4,600  

 

On December 31, 2018:  

Investment in Bonds  $82,499.72  

       Unrealized gain - Bonds   $82,499.72  

 

On January 5, 2019:  

Cash                       $643,500  

Loss on sale of Bonds  $16,500  

     Investment in Bonds   $660,000  

2.)  Rantzow-Lear Company would report in its 2018 balance sheet an Investment in Bonds of $660,000 (Asset).

Rantzow-Lear Company would report in its 2018 income statement an interest revenue from bonds of $4,000 and unrealized gain of from price appreciation of bonds of $82,499.72.

Explanation:

Please see attached excel file for the accounting entries and supporting details.

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