Share
Explore BrainMass

P17-10 (Gain on Sale of Securities and Comprehensive Income)

P17-10 (Gain on Sale of Securities and Comprehensive Income) On January 1, 2010, Acker Inc. had the following balance sheet.
Acker INC.
BALANCE SHEET
AS OF JANUARY 1, 2010
Assets
Cash
$ 50,000
Available-for-sale securities
240,000
Total
$290,000

Common stock
$260,000
Accumulated other comprehensive income
30,000
Total
$290,000
The accumulated other comprehensive income related to unrealized holding gains on available-for-sale securities. The fair value of Acker Inc.'s available-for-sale securities at December 31, 2010, was $190,000; its cost was $140,000. No securities were purchased during the year. Acker Inc.'s income statement for 2010 was as follows. (Ignore income taxes.)
Acker INC.
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2010
Dividend revenue
$ 5,000
Gain on sale of available-for-sale securities
30,000
Net income
$35,000
Instruction
(Assume all transactions during the year were for cash.)
(a) Prepare the journal entry to record the sale of the available-for-sale securities in 2010.
(b) Prepare a statement of comprehensive income for 2010.
(c) Prepare a balance sheet as of December 31, 2010.

Solution Preview

Here's help with each section. You can put it in the right format.

(a)
Fair value $240,000
OCI (30,000)
Cost basis $210,000 (240,000 - 30,000)

Fair value $190,000
Cost basis (140,000)
OCI $ 50,000

Cash ($70,000 + $30,000) 100,000
Gain ...

Solution Summary

P17-10 (Gain on Sale of Securities and Comprehensive Income) On January 1, 2010, Acker Inc. had the following balance sheet.
Acker INC.
BALANCE SHEET
AS OF JANUARY 1, 2010
Assets
Cash
$ 50,000
Available-for-sale securities
240,000
Total
$290,000

Common stock
$260,000
Accumulated other comprehensive income
30,000
Total
$290,000
The accumulated other comprehensive income related to unrealized holding gains on available-for-sale securities. The fair value of Acker Inc.'s available-for-sale securities at December 31, 2010, was $190,000; its cost was $140,000. No securities were purchased during the year. Acker Inc.'s income statement for 2010 was as follows. (Ignore income taxes.)
Acker INC.
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2010
Dividend revenue
$ 5,000
Gain on sale of available-for-sale securities
30,000
Net income
$35,000
Instruction
(Assume all transactions during the year were for cash.)
(a) Prepare the journal entry to record the sale of the available-for-sale securities in 2010.
(b) Prepare a statement of comprehensive income for 2010.
(c) Prepare a balance sheet as of December 31, 2010.

$2.19