Question

Trombly purchased 10% of ABC stock for $100,000 on 1/1/17. Data regarding these securities follow: For the Year Ended Market Value December 31, 2017 $109,000 December 31, 2018 89,000 December 31, 2019 94,000 Assume that Trombly erroneously accounted for these equity securities as if they were "Available for Sale" bonds since their purchase. Net Income for 2019 will be: "g"

Answer 1

Answer: 5000 overstated

Explanation:

The net income is an accounting term that is gotten when depreciation, cost of goods sold, amortization, taxes, interest and expenses are deducted from the income of an entity.

I'm the above question, the net income will be the fair value adjustment that was made which will be:

= 94,000 – 89,000

= 5,000

Therefore, the answer is 5,000 overstated