Southeast Bank invests in trading securities and prepares quarterly financial statements. At the beginning of the fourth quarter of 2016, the bank held as trading securities 200 shares of Eglan Company common stock that originally cost $5,500. At that time, these securities had a fair value of $5,200. During the fourth quarter, the bank engaged in the following trading securities transactions:

Oct. 26	Purchased 300 shares of Farrell Company common stock for $35 per share.
Nov. 26	Sold 200 shares of Eglan common stock for $25 per share.
Dec. 10	Purchased 400 shares of Gray Company common stock for $41 per share.

On December 31, 2016, the quoted market prices of the shares were as follows: Eglan Company, $52 per share; Farrell Company, $38 per share; and Gray Company, $40 per share.

Required:

1.	Prepare journal entries to record the 2016 transactions for the fourth quarter.
2.	Show what the bank reports on its fourth quarter 2016 income statement for these trading securities.
3.	Show how the bank reports these trading securities on its balance sheet at the end of the fourth quarter of 2016.
4.	Next Level What justification does the FASB give for its treatment of unrealized holding gains and losses for trading securities?

FASB requires unrealized gains and losses for trading securities to be reported as a component of income because,

The nearness to cash of trading securities.

The securities are actively managed making the inclusion of gains and losses relevant.

The liquidity needs of the company mean the securities will be sold for cash in the near term.

All of the choices are correct.