Question: Accounting for stock investments Suppose that on January 6, 2016, Southeast Motors paid $450,000,000 for its 25% investment in Torque Motors. Assume Torque earned net income of $80,000,000 and paid cash dividends of $45,000,000 to all outstanding stockholders during 2016. (Assume all outstanding stock is voting stock.)
Requirements: 1. What method should Southeast Motors use to account for the investment in Torque Motors? Give your reasoning.
2. Journalize all required 2016 transactions related to Southeast Motors's Torque investment. Include an explanation for each entry.
3. Post all 2016 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, 2016?