Several years ago, Company X acquired 100% of Company Y for $84,227 cash. Prior to acquisition, Company Y had inventories of $30,041, receivables of $41,734, property, plant and equipment of $17,510 and accounts payable of $18,622 on its books. Company X estimated that all of the assets and liabilities were on Company Y's books at fair value except for inventory which was worth $10,000 more than book value. Assuming purchase accounting treatment (not a merger of equals).On December 31, 2012 Company X had available-for-sale marketable securities with a cost of $1,680, fair value of $1,838 and unrealized gains of $158.

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Question 1 -Suppose Company X holds the same marketable securities through the end of 2013 and that they increased in value to $1,883 by the end of 2013.

What effect (direction and amount) would the securities have had on Company X's 2013 pretax income if they were securities available for sale?

What effect (direction and amount) would the securities have had on Company X's 2013 pretax income if they were trading securities?

Question 2- Instead of holding them on December 31, 2013, suppose Company X's sold the securities on December 31, 2013 for $1,883.

What effect (direction and amount) would the securities have had on Company X's 2013 pretax income if they were securities available for sale?

What effect (direction and amount) would the securities have had on Company X's 2013 pretax income if they were trading securities?