Question

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

Security		Cost		Fair Value		Unrealized Gain (Loss)
A		$17,100		$14,600		$(2,500	)
B		12,500		15,100		2,600
C		22,500		26,000		3,500
Total		$52,100		$55,700		3,600
Previous fair value adjustment balance—Dr.						400
Fair value adjustment—Dr.						$3,200

On January 20, 2021, Cullumber, Inc. sold security A for $14,700. The sale proceeds are net of brokerage fees.

Cullumber, Inc. reports net income in 2020 of $123,000 and in 2021 of $135,000. Total holding gains (including any realized holding gain or loss) equal $40,000 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

Solution:

Requirement 1: statement of comprehensive income for 2020

Cullumber, Inc.
Statement of Comprehensive Income
For the Year Ended December 31, 2020
Net Income(A)		$        123,000
Other Comprehensive Income
Unrealized holding gain(B)		$            3,200
Comprehensive Income(A+B)		$        126,200

Requirement 2: statement of comprehensive income for 2021

Cullumber, Inc.
Statement of Comprehensive Income
For the Year Ended December 31, 2021
Net Income(A)		$        135,000
Add: Other Comprehensive Income
Holding gain	$ 40,000
Add: Reclassification adjustment for loss included
in net income($17,100 - $14,700)	$    2,400	$          42,400
Comprehensive Income [135000 + 42400]		$        177,400
Accumulated other comprehensive income:
Beginning balance, January 1,2021(A)		$            3,200
Current period other comprehensive income	$ 40,000
Amount reclassified from accumulated	$           -
Other comprehensive income	$    2,400
Unrealized holding gain(B)(42000+2800)		$          42,400
Ending balance, December 31, 2021(A+B)		$          45,600