Southeast Bank invests in trading securities and prepares quarterly financial st

Question

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 170 shares of Eglan Company common stock that originally cost $4,675. At that time, these securities had a fair value of $4,420. During the fourth quarter, the bank engaged in the following trading securities transactions: Oct. 26 Purchased 290 shares of Farrell Company common stock for $33 per share. Nov. 26 Sold 170 shares of Eglan common stock for $24 per share. Dec. 10 Purchased 440 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, $36 per share; and Gray Company, $39 per share.

Explanation / Answer

Southeast Bank All Amounts in $ Journal Entries for transactions Date Particulars Debit Credit 26-Oct Farell Company Stock A/c 9570 To Cash A/c 9570 26-Nov Cash A/c 4080 Loss on Sale of Shares A/c 595 To Eglan Common Stock A/c 4675 10-Dec Gray Company Stock A/c 17600 To Cash A/c 17600 31-Dec Farell Company Stock A/c 870 To Gain on Shares A/c 870 31-Dec Loss on Shares A/c 440 To Grey Company A/c 440 Income Statement of Bank Year end revaluation of shares Gain (net of Loss) on revaluation of shares as on December 31, 2013 430 Loss on Sale of Shares of Eglan Company -595 Balance Sheet of Bank Investments (at market value) 170 Shares of Eglan Company 4675 Less : Sold during the year 4675 0 290 Shares of Farell Company @ $ 36 per share 10440 440 Shares of Grey Company @ $ 39 per share 17160

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