F1 M7 Statement of Comprehensive Income

Question 1

A partial listing of a company’s accounts is presented below:
Revenues $80k
Operating expenses $50k
Foreign currency translation adjustment gain, net of tax $4k
Income tax expense $10k
What amount should the company report as net income?

Answer 1

$20k

Question 2

According to the FASB conceptual framework, comprehensive income includes:
Loss on discontinued operations
Investments by owners
Both
Neither

Answer 2

Loss on discontinued operations

It includes any changes in equity except those resulting from investments by owners and distributions to owners.

Question 3

Comprehensive income is equal to ____ plus ____.

Answer 3

Net income plus other comprehensive income

Question 4

A company that uses IFRS reports the following information as of Dec 31
Pension gain $175k
Foreign currency translation loss $120k
Revaluation surplus from revaluation of fixed assets $50k
Unrealized gain on available-for-sale security $32k
Unrealized loss on trading security $20k
Revaluation loss from revaluation of intangible assets $18k
What amount should the company report as other comprehensive income as of Dec 31?

Answer 4

$137k

The loss on trading security and revaluation loss will be reported in net income

Question 5

Reclassification adjustments must be shown in the financial statement that discloses comprehensive income:
A. To show what portion of comprehensive income is from the realization of current assets.
B. To avoid including transactions with shareholders in items of comprehensive income.
C. To show the tax effect of items of comprehensive income.
D. To avoid double counting in comprehensive income items, which are currently displayed in net income.

Answer 5

D.

The double counting example could be comprehensive income showing (unrealized gain) which is now reported as net income (realized gain).

Question 6

What is the purpose of reporting comprehensive income?

Answer 6

To summarize all changes in equity from nonowner sources

Question 7

What is the acronym for listing the other comprehensive income items? Define each letter.

Answer 7

PUFE(R)
Pension adjustments
Unrealized gain or loss on available for sale securities
Foreign translations
Effective portion of hedging
(Revaluation) IFRS only

Question 8

Accumulated other comprehensive income is reported in which of the following financial statements?
A. Statement of cash flows
B. Statement of comprehensive income
C. The income statement
D. The statement of financial position

Answer 8

D

Accumulated other comprehensive income is a balance sheet account