C is corrent. Wellington’s comprehensive income for year 2 is computed as follows:| Increase in retained earnings for year 2 ($210,000 less $140,000) | $70,000 | | Add cash dividends declared for year 2 | 20,000 | | Net income for 2011 | $90,000 | | Deduct the decrease in accumulated other comprehensive income for 2011 ($35,000 less $30,000) | (5,000) | | Comprehensive income for 2011 | $85,000 |
To arrive at net income for year 2, an analysis of the retained earnings account may be necessary. This analysis is shown below. The $5,000 decrease in accumulated other comprehensive income for year 2 was caused by the recognition of unrealized losses on available-for-sale securities. This decrease resulted in an other comprehensive loss for year 2. The other comprehensive loss for year 2 of $5,000 would be deducted from net income of $90,000 to arrive at comprehensive income as shown below. A is incorrect. Wellington’s comprehensive income for year 2 is computed as follows:| Increase in retained earnings for year 2 ($210,000 less $140,000) | $70,000 | | Add cash dividends declared for year 2 | 20,000 | | Net income for 2011 | $90,000 | | Deduct the decrease in accumulated other comprehensive income for 2011 ($35,000 less $30,000) | (5,000) | | Comprehensive income for 2011 | $85,000 |
To arrive at net income for year 2, an analysis of the retained earnings account may be necessary. This analysis is shown below. The $5,000 decrease in accumulated other comprehensive income for year 2 was caused by the recognition of unrealized losses on available-for-sale securities. This decrease resulted in an other comprehensive loss for year 2. The other comprehensive loss for year 2 of $5,000 would be deducted from net income of $90,000 to arrive at comprehensive income as shown below. b is incorrect. Wellington’s comprehensive income for year 2 is computed as follows:| Increase in retained earnings for year 2 ($210,000 less $140,000) | $70,000 | | Add cash dividends declared for year 2 | 20,000 | | Net income for 2011 | $90,000 | | Deduct the decrease in accumulated other comprehensive income for 2011 ($35,000 less $30,000) | (5,000) | | Comprehensive income for 2011 | $85,000 |
To arrive at net income for year 2, an analysis of the retained earnings account may be necessary. This analysis is shown below. The $5,000 decrease in accumulated other comprehensive income for year 2 was caused by the recognition of unrealized losses on available-for-sale securities. This decrease resulted in an other comprehensive loss for year 2. The other comprehensive loss for year 2 of $5,000 would be deducted from net income of $90,000 to arrive at comprehensive income as shown below. D is incorrect. Wellington’s comprehensive income for year 2 is computed as follows:| Increase in retained earnings for year 2 ($210,000 less $140,000) | $70,000 | | Add cash dividends declared for year 2 | 20,000 | | Net income for 2011 | $90,000 | | Deduct the decrease in accumulated other comprehensive income for 2011 ($35,000 less $30,000) | (5,000) | | Comprehensive income for 2011 | $85,000 |
To arrive at net income for year 2, an analysis of the retained earnings account may be necessary. This analysis is shown below. The $5,000 decrease in accumulated other comprehensive income for year 2 was caused by the recognition of unrealized losses on available-for-sale securities. This decrease resulted in an other comprehensive loss for year 2. The other comprehensive loss for year 2 of $5,000 would be deducted from net income of $90,000 to arrive at comprehensive income as shown below. |
