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Chapter 13: 9BE (page 658)

Question: The following information relates to Moran Co. for the year ended December 31, 2017: net income \(1,245.7 million; unrealized holding loss of \)10.9 million related to available-for-sale debt securities during the year; accumulated other comprehensive income of $57.2 million on December 31, 2016. Assuming no other changes in accumulated other comprehensive income, determine (a) other comprehensive income for 2017, (b)comprehensive income for 2017, and (c) accumulated other comprehensive income at December 31, 2017.

Short Answer

Expert verified
  1. $10.9 million
  2. $1,234.8 million
  3. $46.3 million

Step by step solution

01

Step-by-Step Solution Step 1: Definition of unrealized holding loss

An unrealized loss is a loss that is occurred due to a decrease in the book value of the asset without transferring it.

02

calculation of other comprehensive income for 2017

  1. The unrealized loss of the company is $10.9 million. As stated in the chapter, the unrealized holding loss is treated as the other comprehensive income. Hence, the other comprehensive income for 2017 is $10.9 million.
03

Calculation of comprehensive income

(b)

As there is an unrealized loss of the company, it reduces the company's net income by $10.9 million.

Comprehensive  Income=  Net  Income-  Unrealized   loss=  $1,245.7 million-  $10.9  million=  $1,234.8  milllion

04

Step 4:Calculation of accumulated other comprehensive income(c)

If there is accumulated other comprehensive income in the company's books, then the unrealized holding loss will reduce the accumulated other comprehensive income of the company.

ccumulated  other  comprehensive  Income=  Last  other  comprehensive  income- unrealized  Holding  loss=  $57.2 million- $10.9 million= $46.3  million

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Most popular questions from this chapter

EXCEL (Equity Securities Entries and Disclosures) Parnevik Company has the following securities in its

investment portfolio on December 31, 2017 (all securities were purchased in 2017): (1) 3,000 shares of Anderson Co. common

stock which cost \(58,500, (2) 10,000 shares of Munter Ltd. common stock which cost \)580,000, and (3) 6,000 shares of King Company

preferred stock which cost \(255,000. The Fair Value Adjustment account shows a credit of \)10,100 at the end of 2017.

In 2018, Parnevik completed the following securities transactions.

1. On January 15, sold 3,000 shares of Anderson’s common stock at \(22 per share less fees of \)2,150.

2. On April 17, purchased 1,000 shares of Castle’s common stock at \(33.50 per share plus fees of \)1,980.

On December 31, 2018, the market prices per share of these securities were Munter \(61, King \)40, and Castle $29. In addition, the

accounting supervisor of Parnevik told you that, even though all these securities have readily determinable fair values, Parnevik

will not actively trade these securities because the top management intends to hold them for more than one year.

Instructions

(a) Prepare the entry for the security sale on January 15, 2018.

(b) Prepare the journal entry to record the security purchase on April 17, 2018.

(c) Compute the unrealized gains or losses and prepare the adjusting entry for Parnevik on December 31, 2018.

(d) How should the unrealized gains or losses be reported on Parnevik’s income statement and balance sheet?

E13-10 (L03) (Warranties) Soundgarden Company sold 200 color laser copiers on July 10, 2017, for \(4,000 apiece, together with a 1-year warranty. Maintenance on each copier during the warranty period is estimated to be \)330.

Instructions

Prepare entries to record the sale of the copiers, the related warranty costs, and any accrual on December 31, 2017. Actual warranty costs (inventory) incurred in 2017 were $17,000.

What is the nature of a “discount: on notes payable?

Question: Explain how trading debt securities are accounted for and reported?

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