On January 1, 2012, Richards Inc. had cash and common stock of $63,420. At that

Question

On January 1, 2012, Richards Inc. had cash and common stock of $63,420. At that date the company had no other asset, liability or equity balances. On January 2, 2012, it purchased for cash $28,240 of equity securities that it classified as available-for-sale. It received cash dividends of $4,240 net of tax during the year on these securities. In addition, it has an unrealized holding gain on these securities of $5,050 net of tax. Determine the following amounts for 2012: (a) net income; (b) comprehensive income; (c) other comprehensive income; and (d) accumulated other comprehensive income (end of 2012).

(a) Net income $ On January 1, 2012, Richards Inc. had cash and common stock of $63,420. At that date the company had no other asset, liability or equity balances. On January 2, 2012, it purchased for cash $28,240 of equity securities that it classified as available-for-sale. It received cash dividends of $4,240 net of tax during the year on these securities. In addition, it has an unrealized holding gain on these securities of $5,050 net of tax. Determine the following amounts for 2012: (a) net income; (b) comprehensive income; (c) other comprehensive income; and (d) accumulated other comprehensive income (end of 2012).

Explanation / Answer

a, Net income is $3,000, cash dividends received.

b. Comprehensive income is $ 7,000. (cash dividend plus unrealized holding gain net of tax)

3. Other comprehensive income is $ 4000.

It is difference between comprehensive income and net income. ($7000-$3000)

4. Accumulated other comprehensive income as of end of 2010 is $ 4000

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