Question

The following information relates to Moran Co. for the year ended December 31, 2017: net income \(1,245.7 million; unrealized holding loss of \)10.9 million related to available-for-sale debt securities during the year; accumulated other comprehensive income of $57.2 million on December 31, 2016. Assuming no other changes in accumulated other comprehensive income, determine (a) other comprehensive income for 2017, (b)comprehensive income for 2017, and (c) accumulated other comprehensive income at December 31, 2017.

Short answer

a) $10.9 million

b) $1,234.8 million

c) $46.3 million

Step-by-step solution

Step-by-Step Solution Step 1: Definition of unrealized holding loss

An unrealized loss is a loss that is occurred due to a decrease in the book value of the asset without transferring it.

calculation of other comprehensive income for 2017

a) The unrealized loss of the company is $10.9 million. As stated in the chapter, the unrealized holding loss is treated as the other comprehensive income. Hence, the other comprehensive income for 2017 is $10.9 million.

Calculation of comprehensive income

(b)

As there is an unrealized loss of the company, it reduces the company's net income by $10.9 million

$$\begin{gathered} \mathbf{Comprehensive} \mathbf{Income}\mathbf{=} \mathbf{Net} \mathbf{Income}\mathbf{-} \mathbf{Unrealized} \mathbf{loss} \\ \mathbf{=} \mathbf{\$}\mathbf{1}\mathbf{,}\mathbf{245}\mathbf{.}\mathbf{7} \mathbf{million}\mathbf{-} \mathbf{\$}\mathbf{10}\mathbf{.}\mathbf{9} \mathbf{million} \\ \mathbf{=} \mathbf{\$}\mathbf{1}\mathbf{,}\mathbf{234}\mathbf{.}\mathbf{8} \mathbf{milllion} \end{gathered}$$

Step 4:Calculation of accumulated other comprehensive income

(c)

If there is accumulated other comprehensive income in the company's books, then the unrealized holding loss will reduce the accumulated other comprehensive income of the company.

$$\begin{gathered} \mathbf{Accumulated} \mathbf{other} \mathbf{comprehensive} \mathbf{Income}\mathbf{=} \mathbf{Last} \mathbf{other} \mathbf{comprehensive} \mathbf{income}\mathbf{-} \mathbf{unrealized} \mathbf{Holding} \mathbf{loss} \\ \mathbf{=} \mathbf{\$}\mathbf{57}\mathbf{.}\mathbf{2} \mathbf{million}\mathbf{-} \mathbf{\$}\mathbf{10}\mathbf{.}\mathbf{9} \mathbf{million} \\ \mathbf{=} \mathbf{\$}\mathbf{46}\mathbf{.}\mathbf{3} \mathbf{million} \end{gathered}$$