Question

SunTrust Banks, Inc. is a bank holding company based in Atlanta, Georgia. Founded in 1891 as the Commercial Travelers' Savings Bank, the organization underwrote The Coca-Cola Company's initial public offering in 1919, receiving Coca-Cola stock in lieu of underwriting fees. Over the ensuing 91 years, the SunTrust organization has maintained a close relationship with Coca-Cola. Robert Woodruff, Coca-Cola's president from 1923 to 1954, was the son of long-time SunTrust president, Ernest Woodruff. The original copy of the famous Coca-Cola formula is stored in a safe deposit box at one of SunTrust's Atlanta branches.

The financial crisis of 2007-2009 put pressure on most large American financial institutions, including SunTrust. Although the company did not suffer the spectacular drops in asset values that made headlines at other banks, its exposure to property markets and securities connected to these markets caused the bank's regulatory capital to decline.

The following information is taken from Note 5 of SunTrust's 2006 annual report:

Note 5: Securities Available for Sale Securities available for sale at December 31 were as follows:

($ thousands)					Amortized Cost	Unrealized Gains	Unrealized Losses	Fair Value
U.S. Treasury and other U.S. government agencies and corporations					$1,607,999	$8,602	$16,144	$1,600,457
States and political subdivisions					1,032,247	13,515	4,639	1,041,123
Asset-backed securities					1,128,032	1,891	17,584	1,112,339
Mortgage-backed securities					17,337,311	37,365	243,762	17,130,914
Corporate bonds					468,855	1,477	7,521	462,811
Common stock of The Coca-Cola Company					110	2,324,716	-	2,324,826
Other securities					1,423,799	5,446	-	1,429,245
Total securities available for sale					$22,998,353	$2,393,012	$289,650	$25,101,715

What is the maximum amount by which SunTrust Banks, Inc. could have increased its retained earnings by sales of Coca-Cola stock on December 31, 2006? Assume a 35% tax rate would be applied to gains from disposal of available-for-sale securities. Also, assume that taxes would be paid in cash immediately, i.e., on December 31.

Round answer to the nearest thousand.________________________

Beginning in 2007, the pressures of the financial crisis caused SunTrust to use its investment in Coca-Cola to boost its required capital. SunTrust sold 4.605 million shares of Coca-Cola's stock in 2007 for a price of $51 per share. Assume that the sale took place early in the year.

Provide a journal entry for this transaction (ignore taxes).

Round answers to the nearest whole number.

General Journal
Description		Debit	Credit
Cash		Answer	Answer
Unrealized gain		Answer	Answer
Common stock of Coca-Cola Company		Answer	Answer
Gain on sale of securities		Answer	Answer

Answer 1