Suppose on January 1, 2016, Southern Motors paid $430 million for a 30% investme

Question

Suppose on January 1, 2016, Southern Motors paid $430 million for a 30% investment in Bionic Motors. Assume Bionic earned net income of $40 million and declared and paid cash dividends of S80 million during 2016. 1. What method should Southern Motors use to account for the investment in Bionic? Give your reason. Journalize these three transactions on the books of Southern Motors. Show all amounts in millions of dollars (rounded to the closest million), and include an explanation for each entry. Post to the Equity-Method Investment T-account. What is its balance after all the transactions are posted? 2. 3. 1. What method should Southern Motors use to account for the investment in Bionic? Give your reason. | is appropriate because Southern Motors holds a 30% investment in Bionic and, therefore, may have | over Bionic. Click to select your answer(s) and then click Check Answer Clear All Check Answer remaining

Explanation / Answer

Equity method is appropirate because Southern Motors holds a 30% investment in Bionic and ,therefore may have significant influence over Bionic

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