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For purposes of the question, forget about the cash portion completely, your only looking at the BS after the transaction, the cash is gone, forget the word cash.

That cash that disappeared resurfaces as a Net Asset (investment in affiliate) on the balance sheet. If you are using Equity Method, all is well and this is correct as investments are recorded at cost and increased by their pro rata portion NI and decreased by pro rata dividends. However to use proportionate requires you record the portion of the company who you are consolidating TOTAL ASSETS (not net), which is 50% of 1500 or 750. Since you are no longer using equity method you need to deduct the $500 mm investment in affiliate.