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At the start of year 1 owner contribute 100. After year 1 the company purchases the...

At the start of year 1 owner contribute 100. After year 1 the company purchases the financial assets categorized as AFS worth 10. During year 1 the net income is 20 which is retained. The value of financial assets goes up to 12. During year 2 there is treasury stock operation worth 30 Net income is 40 which is retained. Financial asset goes up to 15. Show the relevant equity components at the end of year 1 and 2.

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Answer #1

Answer:

Working:

Relevant equity components at the end of year 1:

Common stcok or capital stock = $100

Retained Earnings = $20

Accumulated Other Comprehensive Income (Loss) = Unrealized gain on AFS financial assets = 12 - 10 = $2

Relevant equity components at the end of year 2:

Common stcok or capital stock = $100

Retained Earnings = $20 + 40 = $60

Accumulated Other Comprehensive Income (Loss) = Unrealized gain on AFS financial assets = 2 + (15 - 12) = $5

Treasury Stock = ($30)

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