Question

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).)

Answer 1

a. $8,200

b. -$4,600

c. -$12,800

d. -$12,800

Step-by-step 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