Reading 32: Understanding the Income Statement-LOS i 习题精选

Net income is equal to $490,000 ($600,000 gross profit – $100,000 operating expenses + $15,000 dividends received – $25,000 interest expense). Comprehensive income includes all transactions that affect stockholders’ equity except transactions with shareholders. Thus, comprehensive income is equal to $435,000 ($490,000 net income – $30,000 unrealized loss from foreign currency translation – $45,000 increase in minimum pension liability + $20,000 unrealized gain on available-for-sale securities). The treasury stock purchase is a transaction with shareholders and is not included in either comprehensive income or net income.

Net income is equal to $41,000 ($100,000 revenue – $40,000 COGS – $20,000 operating expenses + $1,000 realized gain on sale of equipment). Comprehensive income includes all transactions that affect stockholders’ equity except transactions with shareholders. Comprehensive income includes net income, unrealized gains and losses from available-for-sales securities, unrealized gains and losses from cash flow hedging derivatives, and gains and losses from foreign currency translation. Thus, comprehensive income is equal to $43,000 ($41,000 net income + $5,000 unrealized gain from foreign currency translation – $3,000 unrealized loss from cash flow hedging derivatives). Dividends paid is a transaction with shareholders and is not included in comprehensive income.

Unrealized foreign currency translation gains and losses are not reported in the income statement; thus, retained earnings are unaffected. However, unrealized foreign currency gains and losses are included in comprehensive income. Comprehensive income includes all changes in equity except those that result from transactions with shareholders. So, the translation gain increases stockholders’ equity by increasing comprehensive income.