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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Equity Securities The investment manager of 4th National Bank invests some of the bank’s financial resources in equity securities. During the last quarter of 2019, the following transactions occurred in regard to these equity securities:

Chapter 13, Problem 12P, Equity Securities The investment manager of 4th National Bank invests some of the banks financial

On December 31, 2019, the market values of the shares were as follows: Morgan, $87 per share; Parker, $61 per share; and Tathem, $37.25 per share. The bank held no equity securities at the beginning of the last quarter of 2019.

Required:

  1. 1. Prepare journal entries to record the preceding information.
  2. 2. Show what the bank reports on its fourth quarter 2019 income statement for these equity securities.
  3. 3. Show how the bank reports these equity securities on its December 31, 2019, balance sheet.

1.

To determine

Record the journal entries in the books of Bank N for the year 2019.

Explanation

Investment: It refers to the process of using the currently held excess cash to earn profitable returns in future. The investments can be made in equity securities such as shares or debt securities such as bonds.

Record the journal entries in the books of Bank N for the year 2019.

DateAccount Title and Explanation

Debit

($)

Credit ($)
November 5, 2019Investment in equity securities17,200 
     Cash (200×$86) 17,200
 (To record the purchase of equity securities)  
    
November 19, 2019Investment in equity securities18,900 
     Cash (300×$63) 18,900
 (To record the purchase of equity securities)  
    
November 29, 2019Cash (100×$89)8,900 
     Investment in equity securities     (100×$86) 8,600
     Gain on sale of equity securities  300
 (To record the gain on sale of equity securities)  
December 15, 2019Inves

2.

To determine

Show the items that would be reported on the fourth quarter income statement for the equity securities.

3.

To determine

Show the way in which Bank N would report the equity securities in the 2019 balance sheet.

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