Question

Lydell Capital, Inc., makes investments in trading securities. Selected income statement items for the years ended December 31, 2016 and 2017, plus selected items from comparative balance sheets, are shown in the income statement and balance sheet below:

There were no dividends.

Determine the missing items.

Lydell Capital, Inc.
Selected Income Statement Items
For the Years Ended December 31, 2016 and 2017
	2016	2017
Operating Income	$	$
Unrealized Gain (Loss)		(3300)
Net Income	$	$22,800

Feedback

Operating Income-2014: Do this after you have calculated requirements (Unrealized Gain (Loss)) and (Net Income). Then subtract (Unrealized Gain (Loss)) from (Net Income).

Unrealized Gain (Loss)-2014: 2014 valuation allowance minus 2013 valuation allowance. Remember when you subtract a negative number the resulting effect is to add the amount.

Net Income-2014: 2014 retained earnings minus 2013 retained earnings.

Operaing Income-2015: The result of working backwards for 2015 such that net income plus the absolute value of the loss is equal to operating income.

Learning Objective 4.

Lydell Capital, Inc.
Selected Balance Sheet Items
December 31, 2015, 2016, and 2017
	Dec. 31, 2015	Dec. 31, 2016	Dec. 31, 2017
Trading Investments, at Cost	$200400	$237800	$280200
Valuation Allowance for Trading Investments	(9800)	14700
Trading Investments, at Fair Value
Retained Earnings	$236200	$312600	$

Feedback

Trading Investments, at Fair Value-Dec. 31, 2013: The result of adding trading investments plus the valuation allowance for 12/31/13.

Trading Investments, at Fair Value-Dec. 31, 2014: The result of adding trading investments plus the valuation allowance for 12/31/14.

Valuation Allowance for Trading Investments-Dec. 31, 2015: 2014 valuation allowance + 2015 unrealized loss.

Trading Investments, at Fair Value-Dec. 31, 2015: The result of adding trading investments plus valuation allowance for 12/31/15.

Retained Earnings-Dec. 31, 2015: The result of retained earnings for 12/31/14 plus net income 2015.

Learning Objective 4.

Answer 1

Operating income of 2017
Particulars	Amount ($)	Amount ($)
Net income of 2017	22800
Add: Unrealized loss	3300
Operating income of 2017 (22800 + 3300)		26100
Operating income, net income and unrealized gain / (loss) of 2016
Particulars	Amount ($)	Amount ($)
Unrealized gain
Valuation allowance for trading investment as at 31/12/2016	14700
Add: Valuation loss of 2015	9800
Unrealized gain of 2016 (14700 + 9800)		24500
Net income 2016
Retained earnings as at 31/12/2016	312600
Less: Retained earnings as at 31/12/2015	236200
Net income 2016 (312600 - 236200)		76400
Operating income of 2016
Net income 2016 (312600 - 236200)	76400
Less: Unrealized gain of 2016 (14700 + 9800)	24500
Operating income of 2016 (76400 -24500)		51900

	31-Dec-15	31-Dec-16	31-Dec-17
Trading investments at cost	200400	237800	280200
Valuation allowance for trade investment	-9800	14700	(14700-3300)= 11400
Trading investments at fair value	190600	252500	291600
Retained earnings	236200	312600	(312600 +22800)= 335400