Investment in Equity Securities
Response to the following problem:
During 2007, Riverbend Company purchased trading securities as a short-term investment. The costs of the securities and their market values on December 31, 2009, are listed below.
Security Cost Market Value (December 31, 2009)
A $250,000 $130,000
B 160,000 169,000
C 315,000 350,000
Riverbend had no trading securities in the years before 2009. Before any adjustments related to these trading securities, Riverbend had net income of $630,000 in 2009.
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 $240,000?