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

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    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.

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    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