Question

use the following information to answer the next __3__ questions. Jefferson Equipment Inc. finished the year 2016 with gains and losses on its investment assets as follows.

Realized Gains (Losses)on actual sales Unrealized Holding on actual sales Gains (Losses)

Investment in Trading securities $14,000 $6,000

Investment in Available for sale securities $ (8,500) $1,500

14. How much net Gain or Loss will Jefferson include in net income on its income statement for 2016?

a. $13,000 b. $11,500 c. $5,500 d. $20,000

15. How much net Gain or Loss will Jefferson close to Accumulated Other Comprehensive Income in its year-end closing entries?

a. $1,500 b. $6,000 c. $(6,000) d. $7,500

16. Jefferson has net income of $360,000 for the year. How much will Jefferson show as comprehensive income on a Combined Statement of Income and Comprehensive Income?

a. $365,500 b. $373,000 c. $361,500 d. $367,500

Answer 1

Solution 14) For trading securities, since these will be sold within shorter period of time, required to carry on fair value basis. And unrealized gain recorded as net income. While for available for sale, unrealized gain recorded as other comprehensive income in Balance sheet. Hence, net income in income statement will be $11,500. (6000+14000 -8500).

Solution 15) Unrealized gain on Available for Sale securities transfer to Accumulated Other Comprehensive Income. So, $1500 transfer to Accumulated Other Comprehensive Income.

Solution 16) Comprehensive Income on combined statement of Income and Comprehensive is $361,500 ( $360000 + $ 1500 ).