question archive During 2010, Little Company purchased trading securities at short-term investment
During 2010, Little Company purchased trading securities at short-term investment
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During 2010, Little Company purchased trading securities at short-term investment. The cost of the securities and their market value on December 31, 2010 follow:
Security Cost Market value
|
A |
650,000 |
750, 000 |
|
B |
1, 000,000 |
540, 000 |
|
C |
2, 200,000 |
2, 260,000 |
Before any adjustment related to these trading securities, Little had net income of P3, 000,000 for 2010.
What is the net income after making necessary trading security adjustment?
|
a. 3, 000,000 b. 2, 700,000 c. 3, 300,000 d. 2, 540,000 |
|
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|
Answer b |
|
|
Total market value |
3, 550,000 |
|
Total cost |
3, 850,000 |
|
Unrealized loss on trading securities |
(300, 000) |
|
Net income before adjustment |
3, 000,000 |
|
Unrealized loss on trading securities |
(300, 000) |
|
Adjusted net income |
2, 700,000 |
