During 2015, Litten Company purchased trading securities as a short-term investm
ID: 2420526 • Letter: D
Question
During 2015, Litten Company purchased trading securities as a short-term investment. The costs of the securities and their fair values on December 31, 2015, follow:
Security Cost Fair Value
(Dec. 31, 2015)
A $65,000 $75,000
B 100,000 54,000
C 220,000 226,000
At the beginning of 2015, Litten had a zero balance in the marker adjustment – trading securities account. Before any adjustments related to these trading securities, Litten had net income of $300,000.
What is net income after making any necessary trading security adjustments? (Ignore income taxes.)
What would net income be if the fair value of security B were $95,000?
Explanation / Answer
Statement showing net income after adjustments
In case fair value of security B is 95000 then Net income = 300000 - 10000 + 41000 - 6000
= 325000
Net Income before adjustments 300000 Adjustment for security A (10000) Adjustment for security B 46000 Adjustment for security C (6000) Net income after adjustment 330000Related Questions
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