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Chapter 10: Q12RQ (page 567)

What is comprehensive income, and what does it include?

Short Answer

Expert verified

The total of unrealized income and the net incomegenerated by the business entity is known as comprehensive income. Such income includes unrealized holding gains/losses, gains/losses from foreign currency translation and deferred gains/losses.

Step by step solution

01

Definition of Currency Translation Gains/Losses

The gain and losses that arise because of differences in the currency’s value when one currency is exchanged for another are known as current translation gains/losses.

02

Comprehensive Income

Comprehensive income can be defined as the changes taking place in the stockholder’s equity without considering the owner's additional investment made and the dividend distributed by the owner.

Items included in comprehensive income:

  1. Unrealized holding gains or loss from the available for sale investment.
  2. Adjustments in respect of the foreign currency translation.
  3. Gains and losses are about the post-retirement benefits plan.
  4. Deferred gains and losses are about derivatives.

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Most popular questions from this chapter

As a result of the recent mortgage crisis, many banks reported record losses to their mortgage receivables and other assets based on the decline in these assets’ fair values.

Requirements

If a business chooses not to report these losses, is there an ethical issue involved? Who is hurt?

Question: P10-23B Accounting for equity investments

The beginning balance sheet of Text Source Co. included a \(700,000 investment in Taylor stock (20% ownership).

During the year, Text Source completed the following investment transactions:

Mar. 3 Purchased 5,000 shares at \)13 per share of Josh Software common stock as a long-term equity investment, representing 3% ownership, no significant influence.

May 15 Received a cash dividend of \(0.69 per share on the Josh investment.

Dec. 15 Received a cash dividend of \)100,000 from Taylor investment.

31 Received Taylor’s annual report showing \(100,000 of net income.

31 Received Josh’s annual report showing \)620,000 of net income for the year.

31 Taylor’s stock fair value at year-end was \(620,000.

31 Josh’s common stock fair value at year-end was \)14 per share.

Requirements

Prepare Text Source’s partial balance sheet at December 31, 2018, from your answers in Requirement 2.

Accounting for equity investments

On January 1, 2018, Bark Company invests \(10,000 in Roots, Inc. stock. Roots pays Bark a \)400 dividend on August 1, 2018. Bark sells the Roots’s stock on August 31, 2018, for $10,450. Assume the investment is categorized as a short-term equity investment and Bark Company does not have significant influence over Roots, Inc.

Requirements

1. Journalize the transactions for Bark’s investment in Roots’s stock.

Question: S10-6 Accounting for debt investments

On June 1, 2018, Josh’s Restaurant decides to invest excess cash of \(54,400 from the tourist season by purchasing a Jackrabbit, Inc. bond at face value. At year-end, December 31, 2018, Jackrabbit’s bond had a market value of \)51,200. The investment is categorized as an available-for-sale debt investment and will be held for the short-term.

Requirements

What was the net effect of the investment on Josh’s net income for the year ended December 31, 2018?

Question: E10-9 Accounting for debt investments

Advance & Co. owns vast amounts of corporate bonds. Suppose Advance buys $1,100,000 of FermaCo bonds at face value on January 2, 2018. The FermaCo bonds pay interest at the annual rate of 3% on June 30 and December 31 and mature on December 31, 2037. Advance intends to hold the investment until maturity.

Requirements

3. How much interest revenue will Advance report during 2018 on this bond investment?
See all solutions

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