Question

Axel Company buys and sells securities expecting to earn profits on short-term differences
in price. During 2016, Axel Company purchased the following trading securities:
Security                     Cost                            Fair Value (Dec. 31, 2016)
A                                 P195,000                   P225,000
B                                 300,000                     162,000
C                                 660,000                     678,000
Before any adjustments related to these trading securities, Axel Company had net income
of P900,000.      
What is Axel's net income after making any necessary trading security adjustments?
 
Answered by Expert Tutors 
Axel's net income after making any necessary trading security adjustments is = P948,000
Step-by-step explanation
Axel's will use net income of P900,000 to purchase security A & C since they seem to have
higher value by end of 2016 compared to security B which declines.
Purchase of security A & C will leave Axel's with net income of = P45,000
That is, P900,000 - (P195,000+ P660,000) = P45,000
In December, when Axel's sells the securities, he will have a net income of =P948,000
That is,
Security A = P225,000
Security B = P678,000
Remaining net income = P45,000
New or adjusted net income = P948,000
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Subject: Accounting, Business, Financial Accounting
Harvard University 
ACCOUNTANC 
ACCOUNTANC 9090 
Axel Company buys and sells securities expecting to earn profits on short-term differences
in price. During 2016, Axel Company purchased the
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