Chapter 22 E12-5 Rantzow-Lear Company buys and sells securities expecting to ear

Question

Chapter 22 E12-5 Rantzow-Lear Company buys and sells 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 trading account occurred during December 2013 and the first week of 2014. 2013 Dec 17 Purchased 100,000 Grocer's Supply Corpopration preferred shares for $350,000 28 Received cash dividends of $2,000 from the Grocer's Supply Corporation preferred shares 31 REcorded any necessary entry relating to the Grocer's Supply Corporation preferred shares. The market price of the stock was $4 per share 2014 Jan 5 Sold tje Grocer's Supply Corporation preferred shares 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 2013 balance sheet and income statement as a result of this investment. Thank you for helping.

Explanation / Answer

JOURNAL ENTRIES Date Description Debit Credit 17-Dec-11 Preferred Stock 350,000 Cash Purchase of 100,000 Preferred Stock of Grocers' Supply Corporation 2 8-Dec-11 Cash 2000 Preference Dividend Received Received cash dividend on Preferred Stock of Grocers' Supply Corporation 5-Jan-12 Cash Gain on Sale of Preferred Stock Preferred Stock Gain on Sale of Preferred Stock 350,000 2000 395000 45000 350000 Rantzow-Lear Company would show the fair or market value of its investments in 2011 Balance Sheet . The same would be shown as 100,000 Preferred Stock @ $3.5 per share 400,000 There would not be any journal entry required to record the fair value.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

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