Suppose on February 1, 2010, Fall Motors paid $420 million for a 40% investment in Yuza Motors. Assume Yuza earned net income of $50 million and paid cash dividends of $25 million during 2010.
1. What method should Fall Motors use to account for the investment in Yuza? Give your reason.
2. Journalize these three transactions on the books of Fall Motors. Show all amounts in millions of dollars and include an explanation for each entry.
3. Post to the Long-Term Investment T-account. What is its balance after all the transactions are posted?