Nelson Corporation owns equity-method investments in several companies. Suppose Nelson paid $1,500,000 to acquire a 25% investment in Payton Software Company. Payton Software reported net income of $670,000 for the first year and declared and paid cash dividends of $400,000.


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1. Record the following in Nelsons journal:

(a) Purchase of the investment

(b) Nelsons proportion of Payton Software’s net income

(c) Receipt of the cash dividends.

2. What is the ending balance in Nelsons investment account?

N.M.S. Company held securities available for sale and reported the following information at the end of each year:Compute the economic return from investing ratio for 2012, 2013, and 2014.

What do the results suggest about N.M.S.Company?


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