The investment manager of 4th National Bank invests some of the bank’s financial

Question

The investment manager of 4th National Bank invests some of the bank’s financial resources in trading securities. During the last quarter of 2016, the following transactions occurred in regard to these trading securities:

On December 31, 2016, the market values of the shares were as follows: Morgan, $87 per share; Parker, $61 per share; and Tathem, $37.25 per share. The bank held no trading securities at the beginning of the last quarter of 2016.

Required:

Show how the bank reports these trading securities on its December 31, 2016, balance sheet.

Nov. 5 Purchased 200 shares of Morgan Company common stock at $86 per share. 19 Purchased 300 shares of Parker Company preferred stock at $63 per share. 29 Sold 100 shares of Morgan Company common stock at $89 per share. Dec. 15 Purchased 400 shares of Tathem Company common stock at $37 per share. 17 Sold 100 shares of Parker Company preferred stock at $62 per share.

Explanation / Answer

1./

NOV 5

INVESTMENT IN MORGAN COMPANY COMMON STOCK A/C..........................DR $17200

   TO CASH A/C $17200

NOV 19

INVESTMENT IN PARKER COMPANY PREFERED STOCK A/C......................DR $18900

   TO CASH A/C $18900

NOV 29

CASH A/C...........................................................................................DR $8900

   TO INVESTMENT IN MORGAN COMPANY COMMON STOCK $8600

TO PROFIT ON SALE OF INVESTMENT $300

DEC 15

INVESTMENT IN COMMON STOCK OF TATHEM COMPANY A/C..............DR $14800

   TO CASH A/C $14800

DEC 17

CASH A/C.................................................................................................DR $6200

LOSS ON SALE OF INVESTMENTA/C.......................................................DR $100

TO INVESTMENT IN PARKER COMPANY PREFERED STOCK A/C $6300

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IN THE INCOME STATEMET OF THE BANK ON ITS FOURTH QUARTER 2016 ,

$300 WILL REFLECT IN THE REVNUE PART AS PROFIT ON SALE OF INVESTMENT

AND $100 WILL REFLECT IN THE EXPENSES & LOSSES SIDE AS LOSS ON SALE OF INVESTMENT.

AND UNREALIZED GAIN ON MORGAN STOCK (100 * $1) $100 WILL REFLECT ON REVENUE PART

AND UNREALIZED GAIN ON TATHEM STOCK (400 * $0.25) $100 WILL REFLECT ON REVENUE PART

AND UNREALIZED LOSS ON PARKER STOCK (200 * $2) $400 WILL REFLECT ON EXPENSES & LOSSES PART

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3./

TRADING SECURITES

INVESTMENT IN COMMON STOCK OF MORGAN COMPANY (100 * $87) = $8700

INVESTMENT IN PARKER COMPANY PREFERED STOCK (200 * $61) = $12200

INVESTMENT IN COMMON STOCK OF TATHEM COMPANY (400 * $37.25) = $14900

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