Wachovia Case Study - Marketable Securities

Wachovia Corporation – Marketable Securities

A

i. Trading securities are securities that are bought and held principally for the purpose of selling them in the near term and are therefore held for only a short period of time.

ii. Cash $1

Dividend Income $1

Interest or dividends will be reported at the date it is supposed to be received. Most payments are in cash. However, interest and dividends can be accrued in the necessary asset accounts. Trading securities provide revenue for a firm’s daily operations, and they are recorded in a firms operating income which is listed on the Income Statement.

iii. Unrealized Market Adjustment-TS $1

Unrealized Gain-TS $1

B i. Available-for-sale securities are all equity securities that have a readily

determinable fair value and are not classified as trading securities.

ii. Cash $1

Dividend Income $1

Interest or dividends will be reported at the date it is supposed to be received. Most payments are in cash. However, interest and dividends can be accrued in the necessary asset accounts.

iii. Unrealized Market Adjustment (AFS) $1

Unrealized Gain (AFS) $1

C. i. Held-to-Maturity securities are debt securities that the investor

intends to hold until the debt securities mature. This means that the investor will receive the principal on the debt security at maturity rather than selling the security prior to maturity.

ii. You can not make a journal entry because HTM securities are not adjusted / “marked to market.” The gains and losses are not recorded in the financial statements at all

D. i. The balance on the account is 870,304 which is the market value

ii. (870,304 -820,501) = 49,803

Trading Account Assets 49,803

Capital Markets Income (from notes) 49,803

E. i. Securities Available for Sale 7,095,790

ii. -Market Value 7,095,790

-Amortized Cost (AFS) 7,214,190

-Amortized costs are the excess amount of the account value

-Original costs are what was initially paid (book value) and amortized costs are the excess paid over the other companies’ book value.

-The difference between market value and amortized cost is the investment income or loss which is 118, 400

iii. 7,192,800 – 7,095,790

Other Comprehensive Income 97,010

Securities (AFS) 97010

F. i. Securities Held to Maturity (12/31/99) 1,048,724

Amortized Costs (1999) 1,048,724

ii. The market value of the “Securities held-to-maturity according to the information” on the notes page is 1,061,150.

iii. N=25 PMT = 50,000

I = 6 FV = 1,000,000

PV =?

Journal entry: Securities