I have this problem in my intermediate accounting class that I am confused about
ID: 2347389 • Letter: I
Question
I have this problem in my intermediate accounting class that I am confused about....I believe I know the first journal entry but I am severely confused about the other journal entries....here it is....The investment of 4th National bank invests some of the bank's financial resources in trading securities. During the last quarter of 2010, the following transactions occurred in regard to these trading securities.
Nov 5 Purchased 200 shares of M company common stock at $86 per share.
Nov 19 Purchased 300 shares of P company preferred stock at $63 per share.
Nov 29 Sold 100 shares of M Company common stock at $89 per share
Dec 15 Purchased 400 shares of T company common stock at $37 per share
Dec 17 Sold 100 shares of P company preferred common stock at $62 per share
On December 31, 2010, the market values of the shares were follows: M, $87 per share; P, $61 per share; and T, $37.25 per share. The bank held no trading securities at the beginning of the last quarter of 2010
Prepare journal entries to record the preceding information.
Explanation / Answer
Nov 5 Trading Securities (200shares×$86) Dr $17200 Cash Cr $17200 Purchased 200 shares of M Company's common stock at $86 per share Nov 19 Trading Securities (300 Prefshares×$63) Dr $18900 Cash Cr $18900 Purchased 300 shares of P Co.'s Pref share at $63per share Nov 29 Cash (100*89) Dr $8900 Trading Securities (100*$17200/200) Cr $8600 Gain on Sale of Trading Securities Cr $300 Sale of 100 share of M Company Dec 15 Trading Securities (400 Shares×$37) Dr $14800 Cash Cr $14800 Purchased 400 shares of TCo.at $37 per share Dec 17 Cash (100*62) Dr $6200 Loss on Sale of Trading Securities Dr $100 Trading Securities (100*$18900/300) Cr $6300 Sale of 100 share of P Company prepare the adjusting entries & Compute the unrealized gains or losses 31 Dec'10 Trading Securities Dr 100 Unrealized Gain on Investments Cr 100 To record a increase in the value of 100 shares of M co (87-86)*100 = 100 31 Dec'10 Trading Securities Dr 100 Unrealized Gain on Investments Cr 100 To record a increase in the value of 400 shares of T co (37.25-37)*400 = 100 31 Dec'10 Unrealized Loss on Investments Dr 400 Trading Securities Cr 400 To record a decrease in the value of 200 shares of P co (63-61)*200 = 400