Ch 12 - Retained Earnings(2)

Comprehensive income gaap requires that unrealized

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Unformatted text preview: available-for-sale debt & equity investments. Comprehensive Income GAAP requires that Unrealized Items that are normally reported on the balance sheet be Added Back to Compute “Comprehensive Income” The Accumulated Amount of Changes Affecting Comprehensive Income is Reported in Equity Comprehensive Income Comprehensive Income All Changes in Stockholders’ Equity except those resulting from Investments by Stockholders & Distributions to Stockholders Certain Gains & Losses Bypass Net Income & Are Reported as Direct Adjustments to Stockholders’ Equity Example – Unrealized Gain Or Loss On Availablefor-sale Securities Comprehensive Income Comprehensive Income Accounting standards Require Companies Adjust Most Investments in Stocks & Bonds to their Market Value at the end of each Accounting Period During Yr., Stassi purchased IBM stock for $ 10,000 as an investment. At the end of the year, Stassi was still holding the investment, but the stock’s Market Value was now $ 8,000 Comprehensive Income Comprehensive Income How should Stassi Account for the $2,000 Unrealized Loss? Depends on whether Stassi classifies the IBM stock as a: Unrealized Gains & Losses (Income Statement) Trading Security An Available For-Sale Security Unrealized Gains & Losses (Comprehensive Income - Stockholders’ Equity) Comprehensive Income There are 3 Options for Reporting Comprehensive Income Comprehensive Income Statement Comprehensive Income Statement Comprehensive Income Comprehensive Income Income Statement Income Statement Comprehensive Income Comprehensive Income Balance Sheet Balance Sheet Separate Component of Stockholders’ Equity Statement of Stockholders’ Equity Matrix, Inc. Statement of Stockholders' Equity For the Year Ended December 31, 2009 Common stock and (In millions) capital in excess of par Shares Amount Balance at January 1, 2009 821 $ 2,500 Stock sales 17 500 Stock repurchases and retirement (17) (260) Cash dividends declared Other, net Net income Balance at December 31, 2009 821 $ 2,740 Retained Earnings $ 9,500 $ (925) (500) 70 1,523 9,668 Total $ 12,000 500 (1,185) (500) 70 1,523 $ 12,408 Th...
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