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On January 1, 2018, Fall Motors paid $430 million for a 30% investment in Bionic Motors. Bionic earned net income of $40 million and declared
On January 1, 2018, Fall Motors paid $430 million for a 30% investment in Bionic Motors. Bionic earned net income of $40 million and declared and paid cash dividends of $80 million during 2018. Read the requirements. 1. What method should Fall Motors use to account for the investment in Bionic? Give your reason. is appropriate because Fall Motors holds a 30% investment in Bionic and, therefore, may have Vover Bionic. 2. Journalize these three transactions on the books of Fall Motors. Show all amounts in millions of dollars (rounded to the closest million), and include an explanation for each entry. (Enter amounts in illions as provided to you in the problem statement. Round answers to the closest million. Record debits first, then credits. Select the explanation on the last line of the journal entry table.) Begin with the purchase of the investment in Bionic Journal Entry Accounts and Explanations Date Debit Credit Jan Next, record the net income earned Journal Entry Accounts and Explanations Debit Credit Date 2018 Now record the cash dividends received. Journal Entry Accounts and Explanations Debit Credit Date 2018 3. Post to the Equity-Method Investment T-account. What is its balance after all the transactions are posted? (Enter amounts in millions as provided to you in the problem statement Equity-Method Investment Why might a company invest in another company? O A. To earn interest revenue O B. To earn dividend income C. To ensure a steady supply of raw materials if the company being purchased is a supplier of those raw materials O D. All of the above
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