On February 1, 2025, Snowflake Co. decides to invest excess cash of $20,000 by purchasing a Rainbow, Inc. bond at face value. At year-end, December 31, 2025, the fair value of the Rainbow, Inc. bond was $20,800. The investment is categorized as a trading debt investment. 

Requirements 

1. Journalize the transactions for Snowflake Co.’s investment in Rainbow, Inc. for 2025. 

2. In what category and at what value would Snowflake Co. report the asset on the December 31, 2025, balance sheet? In what account would the market price change in Rainbow, Inc.’s bond be reported, if at all? 

3. What was the net effect of the investment on Snowflake Co.’s net income for the year ended December 31, 2025?