Question

At December 31, 2020, the available-for-sale debt portfolio for Crane, Inc. is as follows.

Security		Cost		Fair Value		Unrealized Gain (Loss)
A		$17,600		$16,000		$(1,600	)
B		11,100		15,500		4,400
C		24,000		25,800		1,800
Total		$52,700		$57,300		4,600
Previous fair value adjustment balance—Dr.						500
Fair value adjustment—Dr.						$4,100

On January 20, 2021, Crane, Inc. sold security A for $16,100. The sale proceeds are net of brokerage fees.

Crane, Inc. reports net income in 2020 of $124,000 and in 2021 of $147,000. Total holding gains (including any realized holding gain or loss) equal $43,000 in 2021.

Prepare a statement of comprehensive income for 2020, starting with net income.
Prepare a statement of comprehensive income for 2021, starting with net income.

Answer 1

Requirement 1: Prepare a statement of comprehensive income for 2020 as follows

C Inc
Statement of Comprehensive Income
For the Year Ended December 31, 2020
Particulars		Amount
Net income		$124,000
Other comprehensive income:
Add: Unrealized holding gain		$4,100
Comprehensive income		$128,100

Requirement 2: Prepare a statement of comprehensive income for 2021 as follows

C Inc
Statement of Comprehensive Income
For the Year Ended December 31, 2021
Particulars	Amount	Amount
Net income		$147,000
Other comprehensive income:
Total holding gains in 2021	$43,000
Add: Reclassification adjustment for loss included in net income	$1,500	$44,500
Comprehensive income		$191,500

C Inc
Notes to Financial Statements
Accumulated Other Comprehensive Income:
Particulars	Amount	Amount
Beginning balance, January 1, 2021		$4,100
Other comprehensive income for the current period	$43,000
Add: Amount reclassified from accumulated other comprehensive income	$1,500	$44,500
Ending balance, December 31, 2021		$48,600

Notes:

Particulars	Amount
Net amount received from the sale of Security A	$16,100
Deduct: Cost of Security A	$17,600
Loss on the sale of Security A	($1,500)