Bands and nortel

| August 14, 2017

Bands Corporation owns 35 percent of the common stock of Nortel Company, which it purchased at underlying book value on January 1, 2013. Bands reported a balance of $265,000 for its investment in Nortel Company on January 1, 2013, and $296,800 at December 31, 2013. During 2013, Bands and Nortel Company reported operating income of $360,000 and $80,000 respectively. Nortel received dividends from investments in marketable equity securities in the amount of $9,000 during 2013. It also reported an increase of $28,000 in the market value of its portfolio of trading securities and an increase in the value of its portfolio of securities classified as available-for-sale. Nortel paid dividends of $40,000 in 2013. Ignore income taxes in determining your solution.Required:a. Assuming that Bands uses the equity method in accounting for its investment in Nortel, compute the amount of income from Nortel recorded by Bands in 2013.b. Compute the amount reported by Nortel as other comprehensive income for 2013.c. If all of Nortel’s other comprehensive income arose solely from its investment in available for sale securities purchased on March 10, 2013, for 150,000, what was the market value of those securities at December 31, 2013?

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