A company failed to record unrealized gains of $20 million on its available for sale security investments.Its tax rate is 30%.As a result of this error,comprehensive income would be:
A)Understated by $14 million.
B)Understated by $6 million.
C)Understated by $20 million
D)Unaffected.

Question

Quizplus · Accepted Answer

Unrealized gains on available-for-sale securities are included in other comprehensive income. The after-tax effect of the $20 million unrealized gain is $20 million * (1 - 0.30) = $14 million. Therefore, comprehensive income is understated by $14 million.

A Company Failed to Record Unrealized Gains of $20 Million