Investment in Equity Securities During 2010, JAT Company purchased trading secur

Question

Investment in Equity Securities

During 2010, JAT Company purchased trading securities as a short-term investment. The costs of
the securities and their market values on December 31, 2012, are listed below.

Security    Cost    Market Value
(December 31, 2012)
A    $400,000    $200,000
B    200,000    225,000
C    500,000    600,000

JAT had no trading securities in the years before 2012. Before any adjustments related to these
trading securities, JAT had net income of $900,000 in 2012.

1. What is net income (ignoring income taxes) after making any necessary trading security
adjustments?

2. What would net income be if the market value of Security A were $350,000?

Explanation / Answer

1. net income is 1100

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