OTHER COMPREHENSIVE INCOME
1. On January 1, 2024, Zhang Inc. had cash and share capital of 5,000,000. At that
date, the company had no other asset, liability, or equity balances. On January 5,
2024, it purchased for cash 3,000,000 of equity securities that it classi ed as
FVTOCI. It received cash dividends of 400,000 during the year on these securities.
In addition, it has an unrealized loss on these securities of 300,000. The tax rate is
20%. Compute the amount of comprehensive income.
A. 100,000
B. 80,000
C. 320,000
D. 300,000
2. Madsen Company reported the following information for 2024:
Sales revenue 510,000
Cost of goods sold 350,000
Operating expenses 55,000
Unrealized holding gain on FVTOCI 40,000
Cash dividends received on the securities 2,000
For 2024, Madsen would report other comprehensive income of
A. 137,000
B. 135,000
C. 42,000
D. 40,000
3. During year 1, the “other revenues and gains” section of Totman Company’s
Statement of Earnings and Comprehensive Income contains $5,000 in interest
revenue, $15,000 equity in Harpo Co. earnings, and $25,000 gain on sale of
FVTOCI securities. Assuming the sale of the securities increased the current portion
of income tax expense by $10,000, determine the amount of Totman’s
reclassi cation adjustment to other comprehensive income.
A. $ 5,000
B. $ 2,500
C. $35,000
D. $15,000
4. A company buys ten shares of securities at $2,000 each on December 31, year 1.
The securities are classi ed as FVTOCI. The company does not elect to use the fair
value option for reporting its FVTOCI securities. The fair value of the securities
increases to $2,500 on December 31, year 2, and to $2,750 on December 31, year
3. On December 31, year 3, the company sells the securities. Assume no dividends
are paid and that the company has a tax rate of 30%. What is the amount of the
reclassi cation adjustment for other comprehensive income on December 31, year
3?
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A. $7,500
B. $(7,500)
C. $5,250
D. $(5,250)
5. A company buys ten shares of securities at $1,000 each on January 15, year 1. The
securities are classi ed as FVTOCI. The fair value of the securities increases to
$1,250 per share as of December 31, year 1. The company does not elect to use the
fair value option for reporting FVTOCI securities. Assume no dividends are paid and
that the company has a 30% tax rate. What is the amount of the holding gain arising
during the period that is classi ed in other comprehensive income for the period
ending December 31, year 1?
A. 0
B. $1,750
C. $2,500
D. $7,500
6. Searles does not elect the fair value option for recording nancial assets and
liabilities. What amount of comprehensive income should Searles Corporation report
on its statement of income and comprehensive income given the following net of tax
gures that represent changes during a period?
Pension liability adjustment recognized in OCI $ (3,000)
Unrealized gain on FVTOCI securities 15,000
Reclassi cation adjustment, for securities gain included in net
income (2,500)
Stock warrants outstanding 4,000
Net income 77,000
A. $86,500
B. $89,000
C. $89,500
D. $90,500
7. If ($2,450) net of tax is the reclassi cation adjustment included in other
comprehensive income in the year the securities are sold, what is the gain (loss) that
is included in income from continuing operations before income taxes? Assume a
30% tax rate.
A. $(2,450)
B. $(3,500)
C. $ 2,450
D. $3,500
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