Reference no: EM132568295

Question - 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's trading account occurred during December 2016 and the first week of 2017.

2016 -

Dec. 17 Purchased 135,000 Grocers' Supply Corporation preferred shares for $607,500.

Dec. 28 Received cash dividends of $3,400 from the Grocers' Supply Corporation preferred shares.

Dec. 31 Recorded any necessary adjusting entry relating to the Grocers' Supply Corporation preferred shares. The market price of the stock was $5 per share.

2017 -

Jan. 5 Sold the Grocers' Supply Corporation preferred shares for $641,250.

Required -

1. Prepare the appropriate journal entry for each transaction.

2. Indicate any amounts that Rantzow-Lear Company would report in its 2016 balance sheet and income statement as a result of this investment.