27th Edition
WARREN + 5 others
ISBN: 9781337272094




27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Missing statement items, trading investments

JED Capital Inc. makes investment in trading securities. Selected income statement items for the years ended December 31. Year 2 and Year 3, plus selected items from comparative balance sheets, are as follows:

JED Capital Inc.

Selected Income Statement Items

For the Years Ended December 31, Year 2 and Year 3

  Year 2 Year 3
Operating income a. e.
Unrealized gain (loss) b. $(11,000)
Net income c. 28,000

JED Capital Inc.

Selected Balance Sheet Items

December 31, Year 1, Year 2, and Year 3

  Dec. 31, Year 1 Dec. 31. Year 2 Dec 31, Year 3
Trading investments, at cost $144,000 $168,000 $205,000
Valuation allowance for trading investments (12,000) 17,000 g.
Trading investments, at fair value d. f. h.
Retained earnings $210,000 $245,000 i.

There were no dividends.

Determine the missing lettered items.

To determine

Find the missing amounts from (a) to (i).


Trading securities: These are short-term investments in debt and equity securities, purchased with an intention of trading and earning profits due to changes in market prices.


Compute operating income for Year 2.

  Operating incomefor Year 2} =     Net income for Year 2    –  Unrealized gain (loss) for Year 2={Retained earnings, Year 2–Retained earnings, Year 1}{Valuation allowance, Year 2–Valuation allowance, Year 1}=($245,000–$210,000)($17,000–($12,000))= $35,000–$29,000= $6,000


Compute unrealized gain (loss) for Year 2.

  Unrealized gain(loss)for Year 2} =  {Valuation allowance, Year 2–Valuation allowance, Year 1}=($17,000–($12,000))= $29,000


Compute net income for Year 2.

  Net incomefor Year 2} ={Retained earnings, Year 2–Retained earnings, Year 1}   =($245,000–$210,000)= $35,000


Compute trading investments for Year 1.

  Trading investments for Year 1 }={ Trading investments, at cost, Year 1Valutaion allowance, loss}= $144,000–$12,000= $132,000


Compute operating income for Year 3

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