eztomheducationcom RantzowLear Company buys and sells securi

ezto.mheducation.com Rantzow-Lear Company buys and sells securities expecting to earn profits on short-tem differences in price. The company\'s fiscal year ends on December 31. The folowing selected transactions relating to Rantzow-Lear\'s trading account occurred during December 2016 and the first week of 2017 2018 Dec. 17 Purchased 150,000 Grocers\' Supply Corporation preferred shares for $525,000. 28 Received cash dividends of $4,000 from the Grocers\' Supply Corporation preferred shares 31 Recorded any necessary adjusting entry relating to the Grocers\' Supply Corporation preferred 2017 Jan. 5 Sold the Grocers\' Supply Corporation preferred shares for $562,500. 1. Prepare the appropriate journal entry for each transaction If no entry is required for a transaction/event, select View transaction list 1 Purchased 150,000 Grocers Supply Corporation preferred shares for $525,000, 2 Received cash dividends of $4,000 from the Grocers Supply Corporation preferred shares 3 Recorded any necessary adjusting entry relating to the Grocers\' Supply Corporation preferred shares. The market price of the stock was $4 per share. Sold the Grocers\' Supply Corporation preferred shares for $562,500. 4 s Recorded any necessary adjusting entry relating to the Grocers\' Supply Corporation preferred shares. The Note : -journal entry has been entered 809 WE R TY

Solution

Journal Entries Date Account Title and explanation Debit Credit Dec -17, 2016 Preferred Shares $               5,25,000        To Cash $                 5,25,000 (To record the pruchase of preferred shares) Dec- 28, 2016 Cash Account $                     4,000             To dividend on preferred shares $                       4,000 (To Record the receipt of dividend) Dec -31, 2016 Preferred shares $                  75,000        To Unrealized Gain on investment $                     75,000 (To Record the adjusting entry for the year end) Gain on preferred shares = 150,000 shares X $ 4 = $ 600,000 - $ 525,000 (purchase value) = $ 75,000 Jan- 05 ,2017 Cash $               5,62,500 Unrealized Gain on investment $                  75,000          To Preferred Shares $                 6,00,000          To Realized Gain on sale of preferred shares $                     37,500 (To record the sale of preferred shares)