Trading Securities Southeast Bank invests in trading securities and prepares qua
ID: 2421193 • Letter: T
Question
Trading Securities
Southeast Bank invests in trading securities and prepares quarterly financial statements. At the beginning of the fourth quarter of 2013, the bank held as trading securities 250 shares of Eglan Company common stock that originally cost $6,875. At that time, these securities had a fair value of $6,500. During the fourth quarter, the bank engaged in the following trading securities transactions:
Oct. 26 Purchased 280 shares of Farrell Company common stock for $35 per share.
Nov. 26 Sold 250 shares of Eglan common stock for $24 per share.
Dec. 10 Purchased 460 shares of Gray Company common stock for $40 per share.
On December 31, 2013, the quoted market prices of the shares were as follows: Eglan Company, $52 per share; Farrell Company, $38 per share; and Gray Company, $39 per share.
1. Prepare journal entries to record the preceding information for the fourth quarter. For compound entries, if an amount box does not require an entry, leave it blank.
investments in trading securities
2. Show what the bank reports on its fourth quarter 2013 income statement for these trading securities.
3. Show how the bank reports these trading securities on its balance sheet at the end of the fourth quarter of 2013.
current assets:
2013 investments in trading securities $????? Oct 6 cash $????? Nov 26 cash $????? loss on sale of trading securities $?????investments in trading securities
$????? Dec 10 investments in trading securities $????? cash $????? Dec 31 investments in trading securities $????? unrealized holding gain/loss: trading securities $?????Explanation / Answer
1. Journal entries to record the preceding information for the fourth quarter
Date
Account title
Debit
Credit
2013
Investments in trading securities
9800
Oct 6
Cash
9800
Nov 26
Cash
6000
loss on sale of trading securities
500
investments in trading securities
6500
Dec 10
investments in trading securities
18400
Cash
18400
Dec 31
investments in trading securities
380
unrealized holding gain/loss: trading securities
380
2.Bank reports on its fourth quarter 2013 income statement for these trading securities.
loss on sale of trading securities
460
unrealized holding gain
840
3. Bank reports these trading securities on its balance sheet at the end of the fourth quarter of 2013.
Current assets
investments in trading securities (at fair value)
28580
Date
Account title
Debit
Credit
2013
Investments in trading securities
9800
Oct 6
Cash
9800
Nov 26
Cash
6000
loss on sale of trading securities
500
investments in trading securities
6500
Dec 10
investments in trading securities
18400
Cash
18400
Dec 31
investments in trading securities
380
unrealized holding gain/loss: trading securities
380
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