Suppose on February 1, 2020, General Motors paid ($ 41) million for a (40 %) investment in

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Suppose on February 1, 2020, General Motors paid \(\$ 41\) million for a \(40 \%\) investment in ABC Ltd., an auto parts manufacturer. Assume \(A B C\) earned net income of \(\$ 6\) million and paid cash dividends of \(\$ 2\) million during 2020.

1. What method should General Motors use to account for the investment in \(A B C\) ? Give your reason.

2. Journalize these three transactions on the books of General Motors. Show all amounts in millions of dollars, and include an explanation for each entry.

3. Post to the Long-Term Investment T-account. What is its balance after all the transactions are posted?

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Financial Accounting

ISBN: 9780135433065

7th Canadian Edition

Authors: Walter Harrison, Wendy Tietz, C. Thomas, Greg Berberich, Catherine Seguin

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