In: Accounting
Sheridan Inc. has an investment in available-for-sale securities of $64000. This investment experienced an unrealized loss of $5700 during the current year. Assuming a 40% tax rate, the effect of this loss on comprehensive income will be
Answer is .Decrease by $5,700
The comprehensive income will decrease by $5,700 because unrealised loss of $5,700 during the year will be debited to the comprehensive income. There is no tax affect on this transaction since income tax is considered only for income statement. The accumulated other comprehensive income consists of unrealised gains and losses from available-for-sale securities investments at the end of the year. Hence answer is decrease by $5,700