Statement of Comprehensive Income

Question 1

what is other comprehensive income?

Answer 1

changes in equity that are excluded from NI because they are primarily FV gains or losses related to financial items and are not effective indicators of business performance

derived from non-owner sources

Question 2

what 4 things are included in OCI?

Answer 2

1. unrealized gains/losses on derivatives accounted for as cash flow hedges
2. excess adjustments for the projected benefit obligation and the FV of defined benefit pension plan assets
3. net unrealized holding gains/losses (noncredit related) on investments in available-for sale debt securities
   not for those being transferred into held to maturity
4. foreign currency translation gains/losses

Question 3

how does comprehensive income measure performance?

Answer 3

by calculating an entity’s change in equity from non-owner transactions and events

Question 4

what is the formula for comprehensive income?

Answer 4

Net income + other comprehensive income

NI + OCI

Question 5

difference between: foreign currency transaction and
foreign currency
translation

Answer 5

foreign currency transaction(exchange): gains/losses occur when a transaction will be settled through the
payment/receipt of foreign currency. reported in NET INCOME not OCI

foreign currency translation: gains/losses occur when subsidiaries F/S are denominated in a foreign currency
and translated into US dollars for consolidation purposes.
included in OCI

Question 6

COGS is the cost associated with the goods that were sold so its a….

Answer 6

decrease from NI

Question 7

gain on sale of long term asset (like equipment) is included in…

Answer 7

net income

Question 8

what two formats can comprehensive income be disclosed in?

Answer 8

1. at the bottom of the income statement, continue from NI and add OCI to arrive at comprehensive
   income for the year
2. in a separate statement, start with NI and add OCI to arrive at comprehensive income for the year

Question 9

TRUE OR FALSE

comprehensive income is on the statement of shareholder’s equity and after Retained earnings

Answer 9

FALSE

Question 10

how is net of tax treated in respect to OCI (no FV elected)?

Answer 10

it needs to be taken out (credit) to avoid counting the gains twice (debit)

Question 11

how is net of tax treated in respect to OCI (FV elected)?

Answer 11

all the unrealized gains and losses would be included in earnings during the period incurred

Question 12

what are the 10 key elements of F/S?

Answer 12

1. Assets
2. Liabilities*
3. Equity
   
   4. Investment by owners
   5. Distribution to owners
      
      6. Revenue
      7. Expenses
      8. Gains
      9. Losses

includes deferred revenue

Question 13

treasury stock is deducted from…

Answer 13

stockholder’s equity, it is not a component of OCI

Question 14

TRUE OR FALSE

OCI is reported net of tax

Answer 14

TRUE

Question 15

if FV option is not selected, held-to-maturity securities are reported at…

Answer 15

amortized cost

Question 16

TRUE OR FALSE

at the end of every period, OCI (temporary account) is transferred and closed to AOCI (permanent account)
just like the close of NI to RE

Answer 16

TRUE

Question 17

TRUE OR FALSE

OCI and AOCI will be equal after a business’ first year of operations

Answer 17

TRUE

Question 18

TRUE OR FALSE

OCI specifically includes fair value changes from assets and liabilities in an accounting period

Answer 18

TRUE

Question 19

accumulated other comprehensive income is an…

Answer 19

equity account that collects all such transactions from a company’s history

Question 20

gains and losses from early extinguishment of debt are recognized as components of __________
because the amounts are not directly related to FV: similar to gains and losses on disposal of fixed assets

Answer 20

net income