Suppose that on January 6,2018 Excel Motors Paid $480,000,000 for its 35% investments in Coach Motors. Excel has significant influence over Coach after the purchase. Assume Coach earned net income of $50,000,000 and paid cash dividends of $20,000,000 to all outstanding stockholders during 2018. (Assume all outstanding stock is voting stock.)
Requirement 1. What method should Excel Motors use to account for the investment in Coach Motors? Give your reasoning.
Excel Motors should use ________ (a. Available-for-sale, b. Consolidation, c. Equity or d. Held-to-maturity) method to account for its investment in Coach Motors because the investment __________ (a. Creates a parent-subsidiary relationship between Excel Motors and Coach Motors, b. In Coach is a debt security that Excel Motors plans to hold to maturity or c. Represents a 35% ownership of Coach Motors and Excel Motors has significant influence over Coach Motors)
Requirement 2. Journalize all required 2018 transactions related to Excel Motorss Coach investment. Include an explination for each entry ( Record debits first, then credits. Select the explination on the last line of the journal entry table. If no entry required, select No entry required on the first line of the Accounts and Explination column and leave remaing cells blank)
Possible accounts:
Requirement 3. Post all 2018 transactions to the investment T-account. What is its balance after all the transactions are posted? How would this balance be classified on the balance sheet dated December 31,2018?
Begin by selecting the investment account and posting the 2018 transactions to the investment T-account. Calculate the balance after all transactions are posted .
