CPA Quiz: Report Comprehensive Income
20 questions · exam conditions
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Report Comprehensive IncomeQuestion 1 of 20

Under ASC 220, which of the following is included in other comprehensive income (OCI)?

Unrealized gains on trading securities.
Unrealized gains and losses on available-for-sale debt securities.
Gains on the sale of available-for-sale securities.
Dividends received on equity method investments.
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CPA Quiz: Report Comprehensive Income

Practice Report Comprehensive Income in CPA with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

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Question 1

Under ASC 220, which of the following is included in other comprehensive income (OCI)?

  1. Unrealized gains on trading securities.
  2. Unrealized gains and losses on available-for-sale debt securities. (correct answer)
  3. Gains on the sale of available-for-sale securities.
  4. Dividends received on equity method investments.
Explanation: OCI includes unrealized gains and losses on available-for-sale (AFS) debt securities under ASC 320. Answer B is correct. Unrealized gains on trading securities (A) are recognized in net income, not OCI. Gains on the sale of AFS securities (C) are realized and reclassified from OCI into net income upon sale - they are no longer an OCI item at that point. Dividends from equity method investments (D) are recognized in net income.

Question 2

A company has net income of $500,000 and the following OCI items: unrealized gain on AFS securities $30,000, foreign currency translation loss $15,000, and pension liability adjustment (loss) $20,000. All amounts are pretax at a 25% tax rate. What is comprehensive income?

  1. $495,000
  2. $496,250 (correct answer)
  3. $500,000
  4. $503,750
Explanation: OCI items net of tax: AFS gain = $30,000 x 75% = $22,500. Translation loss = 15,000x7515,000 x 75% = (11,250). Pension loss = 20,000x7520,000 x 75% = (15,000). Net OCI = $22,500 - $11,250 - 15,000=(15,000 = (3,750). Comprehensive income = $500,000 - $3,750 = $496,250. Answer B is correct. Answer A uses pretax OCI. Answer C ignores OCI entirely. Answer D adds OCI instead of subtracting the net loss.

Question 3

A company reports: net income 300,000;unrealizedlossonAFSdebtsecurities(300,000; unrealized loss on AFS debt securities (18,000) net of tax; pension liability adjustment ($12,000) net of tax; foreign currency translation gain $8,000 net of tax. What is comprehensive income?

  1. $322,000
  2. $300,000
  3. $278,000 (correct answer)
  4. $308,000
Explanation: OCI = (18,000)+(18,000) + (12,000) + 8,000=(8,000 = (22,000). Comprehensive income = 300,000+(300,000 + (22,000) = $278,000. Answer C is correct. Answer A adds OCI as a positive amount. Answer B ignores OCI entirely. Answer D counts only the translation gain in OCI.

Question 4

Which of the following correctly describes the tax effect of OCI items under ASC 220?

  1. OCI items are always presented on a pretax basis with a single aggregate tax effect shown.
  2. OCI items may be presented either on a pretax basis with one aggregate tax effect, or net of tax individually, as long as the presentation is consistent. (correct answer)
  3. OCI items are always presented on a net-of-tax basis individually.
  4. No tax effect is reported for OCI items; all taxes are shown in the income tax expense line.
Explanation: ASC 220 permits two acceptable tax presentation methods for OCI: (1) display each OCI component on a pretax basis and show the aggregate income tax effect as a single amount, or (2) display each OCI component net of its individual tax effect. Either approach is acceptable as long as it is applied consistently. Answer B is correct. Answer A mandates pretax with aggregate tax only, excluding the net-of-tax option. Answer C mandates net-of-tax individually, which is only one of the two permitted approaches. Answer D omits tax effects from OCI entirely, which is not permitted.

Question 5

A company's AOCI balance consists of: unrealized AFS loss (20,000)netoftax,andpensionpriorservicecost(20,000) net of tax, and pension prior service cost (15,000) net of tax. During the year, the AFS securities are sold (the $20,000 loss is reclassified to net income) and $3,000 of prior service cost is amortized. What is ending AOCI?

  1. ($35,000)
  2. ($12,000) (correct answer)
  3. ($15,000)
  4. ($32,000)
Explanation: Beginning AOCI = (20,000)+(20,000) + (15,000) = (35,000).ReclassificationofAFSlossintonetincome:+35,000). Reclassification of AFS loss into net income: +20,000 (removes the (20,000)fromAOCI).Amortizationofpriorservicecost:+20,000) from AOCI). Amortization of prior service cost: +3,000 (reduces the (15,000)AOCIbalance).EndingAOCI=(15,000) AOCI balance). Ending AOCI = (35,000) + $20,000 + 3,000=(3,000 = (12,000). Answer B is correct. Answer A is the beginning balance. Answer C uses only the pension balance. Answer D applies the amortization incorrectly.

Question 6

A company has the following year-end balances in AOCI (all net of tax): unrealized gain on AFS debt securities 25,000;pensionpriorservicecost(25,000; pension prior service cost (10,000); foreign currency translation loss ($18,000). What is the total AOCI balance reported in stockholders' equity?

  1. ($3,000) (correct answer)
  2. $53,000
  3. $25,000
  4. ($28,000)
Explanation: AOCI = 25,000+(25,000 + (10,000) + (18,000)=(18,000) = (3,000). The net balance is a deficit (debit) of $3,000, presented as a reduction of stockholders' equity. Answer A is correct. Answer B sums the absolute values. Answer C uses only the AFS gain. Answer D sums only the negative components.

Question 7

An effective fair value hedge results in a $40,000 gain on the hedging derivative at year-end. The hedged item (a fixed-rate debt) has a corresponding $40,000 loss in fair value. Under ASC 815, how are these recognized?

  1. The $40,000 derivative gain is in OCI; the $40,000 hedged item loss is in net income.
  2. Both amounts are in OCI, netting to zero.
  3. Both amounts are in net income, offsetting each other. (correct answer)
  4. The derivative gain is in net income; the hedged item loss is in OCI.
Explanation: For a fair value hedge, both the gain on the hedging instrument and the offsetting loss on the hedged item are recognized in net income in the same period, producing an offset. Unlike cash flow hedges (where the effective portion goes to OCI), fair value hedge changes flow through net income. Answer C is correct. Answers A and D split the recognition between OCI and net income, which applies to cash flow hedges. Answer B puts both in OCI.

Question 8

A company reports comprehensive income of $420,000 and net income of $390,000. Which of the following statements is true?

  1. OCI for the period is ($30,000).
  2. The company has a debit balance in AOCI of $30,000.
  3. OCI for the period is $390,000.
  4. OCI for the period is $30,000. (correct answer)
Explanation: Comprehensive income = Net income + OCI. $420,000 = $390,000 + OCI. OCI = $30,000. Answer D is correct. Answer A shows a negative OCI when comprehensive income exceeds net income - OCI must be positive. Answer B describes the AOCI balance, which cannot be determined from a single year's data. Answer C equates OCI with net income.

Question 9

A company has AOCI of ($45,000) at the beginning of the year. During the year, OCI items (net of tax) include: unrealized gain on AFS securities 20,000andforeigncurrencytranslationloss(20,000 and foreign currency translation loss (8,000). What is ending AOCI?

  1. ($33,000) (correct answer)
  2. ($57,000)
  3. ($25,000)
  4. ($45,000)
Explanation: Net OCI for the year = $20,000 - $8,000 = 12,000.EndingAOCI=(12,000. Ending AOCI = (45,000) + 12,000=(12,000 = (33,000). Answer A is correct. Answer B adds the OCI items as losses. Answer C uses only the unrealized gain without the translation loss. Answer D ignores all current-year OCI activity.

Question 10

A cash flow hedge results in an unrealized gain of $50,000 on the hedging instrument at year-end. The gain is related to a forecasted transaction that has not yet occurred. Under ASC 815, how is this reported?

  1. As a $50,000 gain in OCI (net of tax); reclassified to net income when the hedged item affects earnings. (correct answer)
  2. As a $50,000 gain in net income immediately.
  3. Deferred on the balance sheet as a liability until the forecasted transaction occurs.
  4. Not recognized until the forecasted transaction is probable of occurring.
Explanation: For a cash flow hedge, the effective portion of the hedging instrument's gain or loss is reported in OCI until the hedged forecasted transaction affects earnings, at which point it is reclassified from AOCI to net income. Answer A is correct. Answer B recognizes the gain in net income immediately, which is the fair value hedge treatment. Answer C defers recognition on the balance sheet without OCI treatment. Answer D conditions recognition on probability, but the hedge is already in place - the gain is recognized in OCI.

Question 11

Under ASC 830, foreign currency translation adjustments arise when:

  1. A company records a foreign currency-denominated receivable at the spot rate and remeasures it at year-end.
  2. A company translates a foreign subsidiary's financial statements from its functional currency into the parent's reporting currency. (correct answer)
  3. A company settles a foreign currency-denominated payable at a rate different from the rate used when the payable was recorded.
  4. A company converts cash held in a foreign currency to U.S. dollars at year-end.
Explanation: Foreign currency translation adjustments arise from the process of translating a foreign subsidiary's financial statements (prepared in its functional currency) into the parent's reporting currency. These adjustments are accumulated in OCI. Answer B is correct. Answer A and C describe foreign currency transaction gains/losses, which flow through net income. Answer D describes a cash conversion that creates a transaction gain/loss, not a translation adjustment.

Question 12

This is the final skill in the bank. A company presents two consecutive statements (income statement and statement of OCI) rather than a single continuous statement. Which of the following correctly describes the required content of the statement of OCI under ASC 220?

  1. The statement of OCI begins with comprehensive income and ends with net income.
  2. The statement of OCI presents only the aggregate OCI amount without individual components.
  3. The statement of OCI begins with net income, presents each OCI component (including reclassification adjustments), and ends with total comprehensive income. (correct answer)
  4. The statement of OCI is optional if OCI items are disclosed in the notes.
Explanation: Under the two-statement approach, the statement of OCI begins with net income (the bottom line from the preceding income statement), presents each OCI component including reclassification adjustments, and concludes with total comprehensive income. Answer C is correct. Answer A reverses the starting and ending points. Answer B omits individual component disclosure. Answer D makes the statement optional, which is not permitted when OCI items exist.

Question 13

Under ASC 220, which of the following entities is NOT required to report comprehensive income?

  1. A publicly traded corporation.
  2. A privately held corporation with OCI items.
  3. A limited liability company that prepares U.S. GAAP financial statements with applicable OCI items.
  4. A sole proprietorship. (correct answer)
Explanation: ASC 220 applies to entities that provide a complete set of financial statements under U.S. GAAP and report items of OCI. A sole proprietorship does not issue financial statements under U.S. GAAP's comprehensive income framework and is not subject to ASC 220. Answer D is correct. Public companies (A), private corporations (B), and LLCs that prepare U.S. GAAP financial statements (C) are all within the scope of ASC 220 when they have applicable OCI items.

Question 14

When an available-for-sale debt security is sold, the previously recognized unrealized gain held in AOCI is:

  1. Reclassified from AOCI into net income (reclassification adjustment). (correct answer)
  2. Retained in AOCI permanently since the security has been sold.
  3. Reversed against the gain on sale to avoid double-counting.
  4. Transferred directly to retained earnings upon sale.
Explanation: When an AFS security is sold, the cumulative unrealized gain previously recorded in OCI is reclassified from AOCI into net income as a realized gain. This reclassification adjustment prevents double-counting by removing the amount from OCI that is now included in net income. Answer A is correct. Answer B retains the amount in AOCI, leaving a ghost balance. Answer C reverses the gain, which would understate net income. Answer D transfers to retained earnings, bypassing net income.

Question 15

Under ASC 220, comprehensive income may be presented in which of the following formats?

  1. As a single continuous statement of comprehensive income, or as two consecutive statements (income statement followed by a statement of OCI). (correct answer)
  2. Only as a single continuous statement combining net income and OCI.
  3. Only within the statement of changes in stockholders' equity.
  4. At management's discretion, in any section of the financial statements.
Explanation: ASC 220 allows two presentation options: (1) a single continuous statement of comprehensive income, or (2) two consecutive statements - a statement of net income followed immediately by a statement of OCI. Answer A is correct. Presentation only in the equity section (C) was eliminated by ASU 2011-05. Answer B and D do not correctly describe all permitted options.

Question 16

Accumulated other comprehensive income (AOCI) is reported on the balance sheet as:

  1. A current liability when it has a debit balance.
  2. A component of retained earnings.
  3. A separate component of stockholders' equity. (correct answer)
  4. An intangible asset when it arises from pension adjustments.
Explanation: AOCI is a separate component of stockholders' equity on the balance sheet, distinct from paid-in capital and retained earnings. It accumulates the cumulative after-tax effect of all OCI items. Answer C is correct. A debit balance in AOCI (A) reduces stockholders' equity but is still classified within equity, not as a liability. AOCI is not part of retained earnings (B). Pension-related AOCI (D) is an equity component, not an intangible asset.

Question 17

Under ASC 220, items of other comprehensive income are displayed:

  1. Net of reclassification adjustments for items reclassified to net income during the period. (correct answer)
  2. Gross, with reclassification adjustments presented in a separate section.
  3. Without reclassification adjustments, which are disclosed only in the notes.
  4. Aggregated into a single OCI line item with no breakdown required.
Explanation: ASC 220 requires that OCI components be shown net of reclassification adjustments - the amounts reclassified out of AOCI into net income are presented alongside new OCI activity so that the net change in AOCI is clear. Answer A is correct. Answer B presents gross amounts separately from reclassifications. Answer C moves reclassification disclosure to notes only. Answer D aggregates all OCI without breakdown, which is not sufficient disclosure.

Question 18

Which of the following is the correct definition of comprehensive income under ASC 220?

  1. Net income plus extraordinary items.
  2. Operating income adjusted for nonrecurring items.
  3. Net income plus unrealized gains and losses on trading securities.
  4. The change in equity during a period from transactions and events other than those with owners, including both net income and other comprehensive income. (correct answer)
Explanation: Comprehensive income is the total change in equity from non-owner sources during a period, encompassing both net income and OCI. Answer D is correct. Answer A adds extraordinary items, which were eliminated from U.S. GAAP. Answer B describes an adjusted operating income measure. Answer C includes only trading security unrealized gains/losses - trading security gains flow through net income, not OCI.

Question 19

Meridian Corp. reported net income of $500,000 and other comprehensive income of $75,000 for 2024. During 2024, the company declared and paid cash dividends of $120,000 and issued additional common stock for $200,000. The accumulated other comprehensive income balance at December 31, 2023 was $45,000. What should be the balance in accumulated other comprehensive income at December 31, 2024, assuming no other transactions affecting comprehensive income occurred?

  1. $45,000
  2. $75,000
  3. $120,000 (correct answer)
  4. $200,000
Explanation: Accumulated other comprehensive income (AOCI) is a cumulative balance that increases by the current year's other comprehensive income. The calculation is: Beginning AOCI balance $45,000 + Current year OCI $75,000 = Ending AOCI balance $120,000. Cash dividends and stock issuances do not affect AOCI. Choice A incorrectly maintains the beginning balance. Choice B shows only the current year OCI without adding the cumulative amount. Choice D incorrectly includes the stock issuance amount.

Question 20

During 2024, Apex Corporation sold available-for-sale debt securities with a fair value of $180,000 for $195,000. These securities had an original cost of $160,000, and the company had previously recognized $20,000 in unrealized gains in other comprehensive income related to these securities. How should Apex report this transaction in its 2024 statement of comprehensive income?

  1. Report a $35,000 gain in net income and a $20,000 reclassification adjustment reducing other comprehensive income (correct answer)
  2. Report a $35,000 gain in net income and no adjustment to other comprehensive income
  3. Report a $15,000 gain in net income and a $15,000 increase in other comprehensive income
  4. Report a $15,000 gain in net income and a $20,000 reclassification adjustment reducing other comprehensive income
Explanation: When available-for-sale securities are sold, two things occur: (1) a realized gain/loss is recognized in net income based on the difference between selling price and original cost ($195,000 - $160,000 = $35,000), and (2) any previously recognized unrealized gains/losses in OCI must be reclassified (removed) from OCI to avoid double-counting. The reclassification adjustment removes the $20,000 previously recognized in OCI. Choice B omits the required reclassification adjustment. Choice C uses the wrong realized gain amount and incorrectly increases OCI. Choice D uses the wrong realized gain amount.