Question

Pronghorn Corporation began operations on January 1, 2020 when $236,000 was invested by shareholders of the company. On March 1, 2020, Pronghorn purchased for cash $125,000 of debt securities that it classified as available-for-sale. During the year, the company received cash interest of $7,100 on these securities. In addition, the company has an unrealized holding loss on these securities of $13,500 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. $7,100

b. -$6,400

c. -$13,500

d. -$13,500

Explanation:

The computation is shown below:-

a. Net income

Net income = Cash interest

= $7,100

b. Comprehensive Income = Net Income - unrealized holding loss

= $7,100 - $13,500

= -$6,400

c. Other Comprehensive Income = unrealized holding loss

= -$13,500

d. Accumulated other comprehensive income:

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

= $0 + (-$13,500)

= -$13,500