During 2013, Litten Company purchased trading securities as a short-term investment. The costs of the securities and their fair values on December 31, 2013, follow:

Security ......................................... Cost ....................... Fair Value, Dec. 31, 2013

A ..................................................... $65,000 ........................ $75,000

B ..................................................... 100,000 ........................ 54,000

C ..................................................... 220,000 ........................ 226,000

At the beginning of 2013, 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 $287,000.

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

2. What would net income be if the fair value of security B were $95,000?

Answer rating: 100% (QA)

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