Midwest Bank invests in trading securities. At the beginning of December 2018, t

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:

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 $33 per share.

Required:

4. Next Level If Midwest uses IFRS, how would the accounting be different from U.S. GAAP?

Prepare journal entries to record the December 2018 transactions.

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

Balance Sheet: Show how the bank reports the trading securities on its December 31, 2018, balance sheet.

Midwest Bank

Partial Balance Sheet

December 31, 2018

Current assets:

1.
2.

Dec. 10 Purchased 500 shares of Carroll Company common stock for $76 per share. Dec. 21 Purchased 800 shares of Dynamo Company common stock for $34 per share.

Explanation / Answer

Solution:

Journal entries:

10-Dec

Trading securities

38,000

Cash

38,000

21-Dec

Trading securities

27,200

Cash

27,200

31-Dec

Trading securities

700

Unrealized gain on trading securities (I/S)

700

Description

Cost

FMV

Gain (Loss)

Carroll Company, 500 shares common stock

38,000

39,500

1,500

Dynamo Company, 800 shares common stock

27,200

26,400

-800

65,200

65,900

700

10-Dec

Trading securities

38,000

Cash

38,000

21-Dec

Trading securities

27,200

Cash

27,200

31-Dec

Trading securities

700

Unrealized gain on trading securities (I/S)

700

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