Question

On January 1, 2020, Novak Inc. had cash and common stock of $61,970. At that date, the company had no other asset, liability, or equity balances. On January 2, 2020, it purchased for cash $23,950 of debt securities that it classified as available-for-sale. It received interest of $3,140 during the year on these securities. In addition, it has an unrealized holding gain on these securities of $5,320 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).

Answer 1

On January 1, 2020, Novak Inc. had cash and common stock of $61,970. At that date, the company had no other asset, liability, or equity balances. On January 2, 2020, it purchased for cash $23,950 of debt securities that it classified as available-for-sale. It received interest of $3,140 during the year on these securities. In addition, it has an unrealized holding gain on these securities of $5,320 net of tax.

Below, are the net income, comprehensive income, other comprehensive income, and accumulated other comprehensive income:

Net income: 3,140

Comprehensive income: 0

Other comprehensive income: 5,320

Accumulated other comprehensive income: 5,320

Answer 2

net income 3,140

CI = 0

OCI = 5,320

Accumuated OCI = 5,320

Step-by-step explanation:

the trade securities wil be valued at fair market. the interest on bonds will be recognize as earnings. The holding gains will be part of other comprehensive income until the bonds are sold.

interest revenue 3,140 part of net income

unrealized holding gain 5,320 part of OCI

the OCI will be disclosure on the income statement

while the accumulated OCI on the balance sheet.