Suppose that on January 6, 2018, Excel Motors paid $240,000,000 for its 45% investment in Dynamic Motors. Excel has significant influence over Dynamic after the purchase. Assume Dynamic earned net income of $10,000,000 and paid cash dividends of $15,000,000 to all outstanding stockholders during 2018. (Assume all outstanding stock is voting stock.) Read the requirements Requirement 1. What method should Excel Motors use to account for the investment in Dynamic Motors? Give your reasoning. Excel Motors should use the ▼ method to account for its investment in Dynamic Motors because the investment Requirement 2. Journalize all required 2018 transactions related to Excel Motors's Dynamic investment. Include an explanation for each entry

provided in the explanation segment

Explanation:

To begin we will answer each part accordingly.

For Requirement 1 :  

I would say that Excel Motors should use the Equity method to account for its investment in Dynamic Motors, because the investment results in significant influence over the investment company.

For Requirement 2 :  

In the books of Excel Motors: we have that;

Transaction/ Event   DateAccounts&Explanation   Debit ($

)  Credit($

)

    1.     Jan 6, 2018   Investment in Associate240,000,000    

                                                        Cash                            240,000,000

Accnt&Explan: To record cash paid for equity investment in Dynamic Motors.  

    2.              Cash ( $ 15,000,000 x 45%)      6,750,000  

                        Investment in Associate                         6,750,000

Accnt&Explan:To record dividend received in cash from Dynamic Motors  

3.Investment in Associate ( $ 10,000,000 x 45%)4,500,000  

                                           Investment Revenue                        4,500,000

Accnt&Explan:To record income earned on equity investment

For Requirement 3:

 Equity Investment in Dynamic Motors:

               Cash      240,000,000           Cash                 6,750,000

Investment Income4,500,000  

                                                                       Ending Balance237,750,000

                                      244,500,000  244,500,000

The balance would be classified as a non-current asset on the balance sheet dated December 31, 2018

cheers i hope you understand, this is actually in a tabular form.

the answer is a.

by: nicholas dooley