Rantzow-Lear Company buys and sells debt securities expecting to earn profits on short-term differences in price, and holds these investments in its trading portfolio. The company’s fiscal year ends on December 31. The following selected transactions relating to Rantzow-Lear’s trading account occurred during December 2021 and the first week of 2022.
2021 Dec. 17 Purchased 100 Grocers’ Supply bonds at par for $350,000. 28 Received interest of $2,000 from the Grocers’ Supply bonds. 31 Recorded any necessary adjusting entry relating to the Grocers’ Supply bonds. The market price of the bond was $4,000 per bond. 2022 Jan. 5 Sold the Grocers’ Supply bonds for $395,000.
Required: 1. Prepare the appropriate journal entry for each transaction. 2. Indicate any amounts that Rantzow-Lear Company would report in its 2021 and income statement as a result of this investment.
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