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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