Question

Affymetrix, Inc., reported a net gain of $79,000 on its foreign assets due to the weakening of the U.S. dollar in 2011. In the same year, the company disclosed unrealized gains of $2,271,000 on its available-for-sale securities and a $211,000 unrealized gain on its trading securities. The company also reported a $1,710,000 loss on the sale of some equipment.

Which of the following best describes the impact of these transactions on Affymetrix, Inc.’s accounts?

A) $   851,000 increase to net income.

B) $2,350,000 increase to accumulated other comprehensive income.

C) $2,350,000 increase to net income.

D) $2,561,000 increase to accumulated other comprehensive income.

E) None of the above

Answer: B

Want to solve the problem

Answer 1

The accumulated other comprehensive income account include:

1. Unrealized holding gains or losses on investments that are classified as available for sale

2. Foreign currency translation gains or losses

3. Pension plan gains or losses

4. Pension prior service costs or credits

Hence, we will add 2,271,000 (as per point 1 above) and 79,000 (as per point 2 above). This is how we will arrive at the $2,350,000 increase to accumulated other comprehensive income.