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14 October, 04:32

Craftsman Corporation began operations on January 1, 2020 when $200,000 was invested by shareholders of the company. On March 1, 2020, Craftsman purchased for cash $120,000 of debt securities that it classified as available-for-sale. During the year, the company received cash interest of $8,200 on these securities. In addition, the company has an unrealized holding loss on these securities of $12,800 net of tax. Determine the following amounts for 2020: (a) net income, (b) comprehensive income, (c) other comprehensive income, and (d) accumulated other comprehensive income (end of 2020). (Enter negative amounts using either a negative sign preceding the number e. g. - 15 or parentheses e. g. (15).)

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  1. 14 October, 06:57
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    a. $8,200

    b. - $4,600

    c. - $12,800

    d. - $12,800

    Explanation:

    a. The computation of the net income is shown below:

    Cash interest = net income

    So, the net income is $8,200

    b. The computation of the comprehensive income is shown below:

    = Net income - unrealized holding loss on these securities

    = $8,200 - $12,800

    = - $4,600

    c. The computation of the other comprehensive income is shown below:

    unrealized holding loss = other comprehensive income

    So, other comprehensive income is - $12,800

    d. The computation of the accumulated other comprehensive income is shown below:

    Since there is no beginning balance so the ending would be considered as an unrealized holding loss i. e - $12,800
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