Question

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   of is reported on the income statement .

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

Answer 1

	Midwest Bank
	Journal entries;
Date	Account's tittle	Debit $	Credit $
Dec   _ 10	Investment in Trading Securities - Carroll Company( 500 shares x $ 76 )	38,000
	Cash		38,000
	( To record purchase of shares 500 at $ 76 per share )
Dec _ 21	Investment in Trading Securities - Dynamo Company( 700 shares x $ 35 )	24,500
	Cash		24,500
	( To record purchase of 700 shares at $ 76 per share )
Dec _ 31	Investment in Trading Securities - Carroll Company{ 500 shares x ($ 79 - $ 76)}	1,500
	Unrealized Holding Gain-Trading Securities		1,500
	( To be record appreciation of market value of trading securities )
Dec _ 31	Unrealized Holding Loss -Trading Securities	700
	Investment in Trading Securities - Dynamo Company{ 700 shares x ($ 35- $ 34 )}		700
	( To be record depreciation of market value of trading securities )
2	The unrealized holding gain or loss shall be recognized in Income statement of the financial statements reported in the 2018
3	Total outflow from the bank on purchase of securities = $ 38,000 + $ 24,500 = $ 62,500
	And there is no cash or bank impact on unrealized gain/loss on securities.