Problemsuppose on february 1 2012 western motors paid 380, Ask an Expert

Accounting

Problem:

Suppose on February 1, 2012, Western Motors paid $380 million for a 35% investment in Phase Motors. Assume Phase earned net income of $40 million and paid cash dividends of $20 million during 2012.

Required:

Question 1: What method should Western Motors use to account for the investment in Phase? Give your reason.

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

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

Note: Please show the work not just the answer.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91163924

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