On January 1,2018, Western Motors paid $450 million for a 40% investment in Yaza Motors. Yaza earned netincome of $65 million and declared and paid cash dividends of $45 million during 2018.1. What method should Western Motors use to account for the investment in Yaza? Give yourreason.2. Journalize these three transactions on the books of Western Motors. Show all amounts inmillions of dollars (rounded to the closest million), and include an explanation for eachentry.3. Post to the Equity-Method Investment T-account. What is its balance after all the transactions are posted?
On January 1,2018, Western Motors paid $450 million for a 40% investment in Yaza Motors. Yaza earned netincome of $65 million and declared and paid cash dividends of $45 million during 2018.1. What method should Western Motors use to account for the investment in Yaza? Give yourreason.2. Journalize these three transactions on the books of Western Motors. Show all amounts inmillions of dollars (rounded to the closest million), and include an explanation for eachentry.3. Post to the Equity-Method Investment T-account. What is its balance after all the transactions are posted?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
On January 1,
2018, Western Motors paid $450 million for a 40% investment in Yaza Motors. Yaza earned net
income of $65 million and declared and paid cash dividends of $45 million during 2018.
1. What method should Western Motors use to account for the investment in Yaza? Give your
reason.
2. Journalize these three transactions on the books of Western Motors. Show all amounts in
millions of dollars (rounded to the closest million), and include an explanation for each
entry.
3. Post to the Equity-Method Investment T-account. What is its balance after all the transactions are posted?
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