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Question: midwest bank invests in trading securities at the beginning of...

Question details

Midwest Bank invests in trading securities. At the beginning of December 2018, the bank held no trading securities. During December of 2018, it entered into the following trading securities transactions:

Dec. 10 Purchased 500 shares of Carroll Company common stock for $76 per share.
Dec. 21 Purchased 700 shares of Dynamo Company common stock for $35 per share.

At the end of December, the Carroll Company common stock had a quoted market price of $79 per share, and the Dynamo Company common stock had a quoted market price of $34 per share.

Required:

1. Prepare journal entries to record the December 2018 transactions.
2. What is the unrealized holding gain or loss, and where is it reported in the 2018 financial statements?
3. Show how the bank reports the trading securities on its December 31, 2018, balance sheet.
4. Next Level If Midwest uses IFRS, how would the accounting be different from U.S. GAAP?
CHART OF ACCOUNTS
Midwest Bank
General Ledger
ASSETS
111 Cash
113 Investment in Trading Securities
121 Accounts Receivable
141 Inventory
152 Prepaid Insurance
181 Equipment
189 Accumulated Depreciation
LIABILITIES
211 Accounts Payable
231 Salaries Payable
250 Unearned Revenue
261 Income Taxes Payable
EQUITY
311 Common Stock
331 Retained Earnings
REVENUE
411 Sales Revenue
EXPENSES
500 Cost of Goods Sold
511 Insurance Expense
512 Utilities Expense
521 Salaries Expense
532 Bad Debt Expense
540 Interest Expense
541 Depreciation Expense
559 Miscellaneous Expenses
910 Income Tax Expense
912 Unrealized Holding Gain/Loss-Trading Securities

Prepare journal entries to record the December 2018 transactions. Additional Instruction

All transactions on this page must be entered (except for post ref(s)) before you will receive Check My Work feedback.

PAGE 1

GENERAL JOURNAL

Score: 7/76

DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT

1

2

3

4

5

6

Points:

1.38 / 15

What is the unrealized holding gain or loss, and where is it reported in the 2018 financial statements?

At the end of December an unrealized holding gain Correct   of is reported on the income statement Correct .

Points:

2 / 3

Check My Work

The accounting for trading securities applies the most complete fair value measurement approach.

Show how the bank reports the trading securities on its December 31, 2018, balance sheet. Additional Instructions

Midwest Bank

Partial Balance Sheet

December 31, 2018

1

Current assets:

2

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