McCloud Corporation owns equity-method investments in several companies. Suppose McCloud paid $1,800,000 to acquire a 40% investment in Simpson Software Company. Simpson Software reported net income of $660,000 for the first year and declared and paid cash dividends of $460,000.
Requirements
1. Record the following in McCloud’s journal:
(a) Purchase of the investment,
(b) McCloud’s proportion of Simpson Software’s net income, and
(c) Receipt of the cash dividends.
2. What is the ending balance in McCloud’s investment account?