Gerogi Company had the following balances for income from continuing operations and pretax gains and losses on December 31: $\begin{array}{lr}
\text { Income from continuing operations } & \$ 540,000 \
\text { Unrealized loss on trading security } & (92,000) \
\text { Unrealized gain on available-for-sale } & \
\quad \text { debt security } & 30,000 \
\text { Unrealized loss on pension adjustment } & (110,000) \
\text { Gain on disposal of discontinued operations } & 240,000
\end{array}$ The company's effective tax rate is 40%. What amount should Gerogi Company report as comprehensive income for the year ended December 31?
A) $580,800
B) $684,000
C) $492,000
D) $636,000

Question

Quizplus · Accepted Answer

Comprehensive income includes income from continuing operations and other comprehensive income (OCI) items. OCI includes unrealized gains/losses on available-for-sale securities and pension adjustments. Calculate net income: $540,000 (income from continuing operations) - $92,000 (unrealized loss on trading security) + $240,000 (gain on disposal of discontinued operations) = $688,000. Then, calculate OCI: $30,000 (unrealized gain on available-for-sale security) - $110,000 (unrealized loss on pension adjustment) = -$80,000. Comprehensive income = $688,000 - $80,000 = $608,000. After tax adjustment (40% tax rate), the comprehensive income is $636,000.

Gerogi Company Had the Following Balances for Income from Continuing