Lydell Capital, Inc., makes investments in trading securities. Selected income s
ID: 2521387 • Letter: L
Question
Lydell Capital, Inc., makes investments in trading securities. Selected income statement items for the years ended December 31, 2016 and 2017, plus selected items from comparative balance sheets, are shown in the income statement and balance sheet below:
There were no dividends.
Determine the missing items.
Feedback
Operating Income-2014: Do this after you have calculated requirements (Unrealized Gain (Loss)) and (Net Income). Then subtract (Unrealized Gain (Loss)) from (Net Income).
Unrealized Gain (Loss)-2014: 2014 valuation allowance minus 2013 valuation allowance. Remember when you subtract a negative number the resulting effect is to add the amount.
Net Income-2014: 2014 retained earnings minus 2013 retained earnings.
Operaing Income-2015: The result of working backwards for 2015 such that net income plus the absolute value of the loss is equal to operating income.
Learning Objective 4.
Feedback
Trading Investments, at Fair Value-Dec. 31, 2013: The result of adding trading investments plus the valuation allowance for 12/31/13.
Trading Investments, at Fair Value-Dec. 31, 2014: The result of adding trading investments plus the valuation allowance for 12/31/14.
Valuation Allowance for Trading Investments-Dec. 31, 2015: 2014 valuation allowance + 2015 unrealized loss.
Trading Investments, at Fair Value-Dec. 31, 2015: The result of adding trading investments plus valuation allowance for 12/31/15.
Retained Earnings-Dec. 31, 2015: The result of retained earnings for 12/31/14 plus net income 2015.
Learning Objective 4.
Lydell Capital, Inc. Selected Income Statement Items For the Years Ended December 31, 2016 and 2017 2016 2017 Operating Income $ $ Unrealized Gain (Loss) (3300) Net Income $ $22,800Explanation / Answer
Operating income of 2017
Particulars
Amount ($)
Amount ($)
Net income of 2017
22800
Add: Unrealized loss
3300
Operating income of 2017 (22800 + 3300)
26100
Operating income, net income and unrealized gain / (loss) of 2016
Particulars
Amount ($)
Amount ($)
Unrealized gain
Valuation allowance for trading investment as at 31/12/2016
14700
Add: Valuation loss of 2015
9800
Unrealized gain of 2016 (14700 + 9800)
24500
Net income 2016
Retained earnings as at 31/12/2016
312600
Less: Retained earnings as at 31/12/2015
236200
Net income 2016 (312600 - 236200)
76400
Operating income of 2016
Net income 2016 (312600 - 236200)
76400
Less: Unrealized gain of 2016 (14700 + 9800)
24500
Operating income of 2016 (76400 -24500)
51900
31-Dec-15
31-Dec-16
31-Dec-17
Trading investments at cost
200400
237800
280200
Valuation allowance for trade investment
-9800
14700
(14700-3300)= 11400
Trading investments at fair value
190600
252500
291600
Retained earnings
236200
312600
(312600 +22800)= 335400
Operating income of 2017
Particulars
Amount ($)
Amount ($)
Net income of 2017
22800
Add: Unrealized loss
3300
Operating income of 2017 (22800 + 3300)
26100
Operating income, net income and unrealized gain / (loss) of 2016
Particulars
Amount ($)
Amount ($)
Unrealized gain
Valuation allowance for trading investment as at 31/12/2016
14700
Add: Valuation loss of 2015
9800
Unrealized gain of 2016 (14700 + 9800)
24500
Net income 2016
Retained earnings as at 31/12/2016
312600
Less: Retained earnings as at 31/12/2015
236200
Net income 2016 (312600 - 236200)
76400
Operating income of 2016
Net income 2016 (312600 - 236200)
76400
Less: Unrealized gain of 2016 (14700 + 9800)
24500
Operating income of 2016 (76400 -24500)
51900
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.