Question

Flounder Corporation began operations on January 1, 2020 when $230,000 was invested by shareholders of the company. On March 1, 2020, Flounder purchased for cash $101,000 of debt securities that it classified as available-for-sale. During the year, the company received cash interest of $8,900 on these securities. In addition, the company has an unrealized holding loss on these securities of $13,100 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).)

Answer 1

Answer:(a) $8,900

(b) -($4,200)

(c) -($13,100)

(d) -($13,100)

Explanation:

Given that,

Amount invested by shareholders = $230,000

Debt securities purchased for cash = $101,000

Received cash interest on securities = $8,900

unrealized holding loss on these securities = $13,100

(a) Net Income = $8,900(Cash interest received)

(b) Comprehensive Income = Net Income - unrealized holding loss

                                              = $8,900 - $13,100

                                              = -($4,200)

(c) Other Comprehensive Income = unrealized holding loss

                                                        = -($13,100)

(d) Accumulated other comprehensive income:

Ending Balance of other comprehensive income = Beginning Balance + During this year

= $0 + (-$13,100)

= -($13,100)