The following information relates to Moran Co. for the year ended December 31, 2017: net income $1,245.7 million; unrealized holding loss of $10.9 million related to available-for-sale debt securities during the year; accumulated other comprehensive income of $57.2 million on December 31, 2016. Assuming no other changes in accumulated other comprehensive income, determine (a) other comprehensive income for 2017, (b)comprehensive income for 2017, and (c) accumulated other comprehensive income at December 31, 2017.
a) $10.9 million
b) $1,234.8 million
c) $46.3 million
An unrealized loss is a loss that is occurred due to a decrease in the book value of the asset without transferring it.
a) The unrealized loss of the company is $10.9 million. As stated in the chapter, the unrealized holding loss is treated as the other comprehensive income. Hence, the other comprehensive income for 2017 is $10.9 million.
As there is an unrealized loss of the company, it reduces the company's net income by $10.9 million
If there is accumulated other comprehensive income in the company's books, then the unrealized holding loss will reduce the accumulated other comprehensive income of the company.
(Accounting for Pre-Opening Costs) After securing lease commitments from several major stores, Auer Shopping Center, Inc. was organized and built a shopping center in a growing suburb.
The shopping center would have opened on schedule on January 1, 2017, if it had not been struck by a severe tornado in December. Instead, it opened for business on October 1, 2017. All of the additional construction costs that were incurred as a result of the tornado were covered by insurance.
In July 2016, in anticipation of the scheduled January opening, a permanent staff had been hired to promote the shopping center, obtain tenants for the uncommitted space, and manage the property.
A summary of some of the costs incurred in 2016 and the first nine months of 2017 follows.
January 1, 2017, through September 30, 2017
Interest on mortgage bonds
Cost of obtaining tenants
The promotional advertising campaign was designed to familiarize shoppers with the center. Had it been known in time that the center would not open until October 2017, the 2016 expenditure for promotional advertising would not have been made. The advertising had to be repeated in 2017.
All of the tenants who had leased space in the shopping center at the time of the tornado accepted the October occupancy date on the condition that the monthly rental charges for the first 9 months of 2017 be canceled.
Explain how each of the costs for 2016 and the first 9 months of 2017 should be treated in the accounts of the shopping center corporation. Give the reasons for each treatment.
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