Trading Securities
During 2008, Litten Company purchased trading securities as a short term investment. The costs of the securities and their market values on December 31, 2008, follow:
|
|
|
Market Value, |
|
Security |
Cost |
Dec 31, 2008 |
|
A |
$ 65,000 |
$ 75,000 |
|
B |
100,000 |
54,000 |
|
C |
220,000 |
226,000 |
At the beginning of 2008, Litten had a zero balance in the market adjustment—trading securities account. Before any adjustments related to these trading securities, Litten had net income of $300,000.
1. What is net income after making any necessary trading security adjustments? (Ignore income taxes.)
2. What would net income be if the market value of security B were $95,000?