CPA Financial Accounting and Reporting (FAR) : Other Comprehensive Income
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Example Questions
Example Question #1 : Other Comprehensive Income
Camino Corporation reported the following items in Year 3: Foreign currency translation loss: $3,000; distributions to owners: $15,000; net income: $125,000; unamortized prior service cost on pension plan: $12,000; deferred gain on an effective cash flow hedge: $8,000. What amount should Camino report as other comprehensive income (loss) in Year 3?
$7,000
$35,000
$20,000
$32,000
$7,000
Included in other comprehensive income are the $3K foreign currency translation loss, the $12K in prior service cost, and the $8K gain on cash flow hedge.
Example Question #2 : Other Comprehensive Income
Which of the following is incorrect regarding the reporting of comprehensive income?
Comprehensive income may be shown on its own financial statement
Comprehensive income can be presented with the income statement as a single financial statement
The terms comprehensive income and other comprehensive income can be used interchangeably
Comprehensive income includes revenues and expenses that have not been realized in net income
The terms comprehensive income and other comprehensive income can be used interchangeably
Other comprehensive income includes several specific items that have not yet hit net income, while other comprehensive income includes these same items but begins with net income.
Example Question #3 : Other Comprehensive Income
Which of the following items would not be included in other comprehensive income?
Unrealized holding gains or losses on investments classified as available for sale
Unrealized holding gains or losses on investments classified as trading securities
Foreign currency translation gains or losses
Pension prior service costs or credits
Unrealized holding gains or losses on investments classified as trading securities
Unrealized holding gains/losses are included in net income.
Example Question #4 : Other Comprehensive Income
Peace Corp purchases marketable securities in Love Corp during Year 5. At the end of Year 5, the fair value of Love stock has dropped below its cost. Peace considered the decline in value to be temporary. The security is classified as available-for-sale. What should be the effect on Peace's financial statements at the end of Year 5?
Decrease in available-for-sale assets and decrease in other comprehensive income
No effect on available-for-sale assets and decrease in net income
Decrease in available-for-sale securities and decrease in net income
No effect on net income and decrease on available-for-sale assets
Decrease in available-for-sale assets and decrease in other comprehensive income
Securities that are classified as available-for-sale recognize holding gains/losses in OCI. Therefore, to adjust the securities to market value, the investment asset is decreased and a loss is recognized in OCI.
Example Question #5 : Other Comprehensive Income
Of the following, which are listed on the Statement of Comprehensive Income?
Net income
Neither
Other Comprehensive Income
Both
Both
Both of these items are listed and broken out on the Statement of Comprehensive Income. Net income are more regular and standard income items where as OCI items are less frequent and do not reflect normal operations.
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