Question

Pronghorn Corporation, a clothing retailer, had income from operations (before tax) of $405,000, and recorded the following before-tax gains/(losses) for the year ended December 31, 2020:

Gain on disposal of equipment		29,160
Unrealized (loss)/gain on FV-NI investments		(58,320	)
(Loss)/gain on disposal of building		(73,440	)
Gain on disposal of FV-NI investments		35,640

Pronghorn also had the following account balances as at January 1, 2020:

Retained earnings		$442,800
Accumulated other comprehensive income (this was due to a revaluation surplus on land)		91,280
Accumulated other comprehensive income (this was due to gains on FV-OCI investments)		59,400

As at January 1, 2020, Pronghorn had one piece of land that had an original cost of $142,000 that it accounted for using the revaluation model. It was most recently revalued to fair value on December 31, 2019, when its carrying amount was adjusted to fair value of $233,280. In January 2020, the piece of land was sold for proceeds of $233,280. In applying the revaluation model, Pronghorn maintains the balance in the Revaluation Surplus (OCI) account until the asset is retired or disposed of.

In 2015, Pronghorn purchased a portfolio of debt investments that the company intended to hold for longer term and classified the portfolio of investments as fair value through other comprehensive income (FV-OCI) with gains/losses recycled through net income. The investments in the portfolio are traded in an active market. Pronghorn records unrealized gains and losses on these investments as OCI, and then books these gains and losses to net income when they are impaired or sold. The portfolio’s carrying amount on December 31, 2019, was $118,800. The entire portfolio was sold in November 2020 for proceeds of $136,080.

Calculate net income for the year ended December 31, 2020, if Pronghorn prepares financial statements in accordance with ASPE. Pronghorn’s income tax expense would not change.

Answer 1

Pronghorn Corporation, a clothing retailer Dec 31st  2020

Income	$Amt	Expense	$Amt
Opning Balance As on Jan 1st 2020	442,800	Unrealized (loss)/gain on FV-NI investments	58,320
Gain on disposal of equipment	29,160	(Loss)/gain on disposal of building	73,440
Gain on disposal of FV-NI investments	36,640
Accumulated other comprehensive income (this was due to a revaluation surplus on land)	91,280
Accumulated other comprehensive income (this was due to gains on FV-OCI investments)	59,400
Income from portfolio sold	17,280
		Profit	543,800
Total	675,560	Total	675,560