Question
ABC buys and sells securities expecting to earn profits on short-term differences in price.The following selected transactions relate to their investments in trading securities during
ABC buys and sells securities expecting to earn profits on short-term differences in price.The following selected transactions relate to their investments in trading securities during 2022-2023. The company's fiscal year ends on December 31. No trading securities were held by ABC on Jan 1, 2022. 2022
May 1) Purchased 10,000 shares of CAT stocks for $120 per share
Jun 1) Purchased 10,000 shares of CAT stocks for $115 per share
Jul 1) Sold 15,000 shares of CAT stocks for $125 per share.
Nov 1)Received dividend $50,000
Dec 31) Market price for CAT is $145 per share
2023
Apr 1) Purchased 10,000 CAT stocks for $160 per share
May 1) Sold 7,000 CAT stocks for $150 per share
July 1) Purchased 10,000 CAT stocks for $180 per share
Aug 1) Sold 5,000 shares of CAT stocks for $190 per share
Dec 31) Market price for CAT is $170 per share
ABC uses the first-in first-out (FIFO) cost-basis assumption. What is the total effect of the investment in CAT on ABC's 2023 net income?
$120,000
$90,000
$155,000
$85,000
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