Response to the following problem:
Suppose on January 6, 20X5, General Motors paid $100 million for its 40% investment in Isuzu. Assume Isuzu earned net income of $20 million and paid cash dividends of $10 million during 20X5.
1. What method should General Motors use to account for the investment in Isuzu? Give your reason.
2. Journalize these three transactions on the books of General Motors. Show all amounts in millions of dollars and include an explanation for each entry.
3. Post to the Long-Term Equity-Method Investment T-account. What is its balance after all the transactions are posted?