An inexperienced accountant for Cheyenne Corp. showed the following in the income statement: income before income taxes $371,000 and unrealized gain on available-for-sale securities (before taxes) $88,700. The unrealized gain on available-for-sale securities and income before income taxes are both subject to a 35% tax rate. Prepare a correct statement of comprehensive income.

An correct statement was prepared for a comprehensive income which is given below.

Explanation:

Solution

Given that:

Cheyenne Corporation

Correct Statement of Comprehensive/General Income

Income before income taxes $371,000

The less Tax ($371,000 * 35%) $129,850

The Net Income $241,150

Other Comprehensive income

Unrealized profit on present for

sales securities, net of tax $57,655

The comprehensive income

($241,150 + $57,655) $298,805

Note:

The Unrealized profit on present for sales securities, net of tax is given as

= ($88,700 * (100% - 35%))

=$88,700 * 65%

=$57,655