Question

Bakersfield Company reports net income in 2020 of $1,200,000 and in 2021 of $1,400,000. Total holding gains (including any realized holding gain or loss) equal $400,000 in 2021. Instructions: a. Prepare a statement of comprehensive income for 2020, starting with net income. b. Prepare a statement of comprehensive income for 2021, starting with new income.

Answer 1

Bakersfield Company

a) Statement of Comprehensive Income for 2020:

Net Income = $1,200,000

Comprehensive Income = $1,200,000

b) Statement of Comprehensive Income for 2021:

Net Income = $1,400,000

Holding Gain = $400,000

Comprehensive Income = $1,800,000

Step-by-step explanation:

a) Comprehensive Income includes the Net Income, which includes accrued expenses and income, and other holding gains and losses.

b) Holding gains and losses refers to increases and decreases to the replacement cost of an asset or the value of a liability. Holding gains and losses can be realized as well as unrealized. It is realized when the transaction has been finalized. If the transaction has not been finalized, the holding gain or loss is unrealized.