Answer: 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 Date Accounts&Explanation Debit ($
) Credit($
)
1. Jan 6, 2018 Investment in Associate 240,000,000
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 Income 4,500,000
Ending Balance 237,750,000
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.
