Question

Bond Company sells inventory to its subsidiary, Esquivel Company, at a profit during 2020. If Bond uses the cost method to account for its equity investment in Esquivel, which of the following would be credited in the consolidated worksheet for 2021?
a. Sales
b. Cost of goods sold
c. Inventory
d. Investment in subsidiary

Answer 1

Answer:

The answer for what will be credited in the consolidated worksheet for 2021 is option B) cost of goods sold

Explanation:

The cost method is a type of accounting used for investments. This method is used when the investor exerts little or no influence over the investment that it owns.

The investor reports the cost of the investment as an asset. When dividend income is received, it is immediately recognized on the income statement.

If bond uses the cost method to account for its equity investment in Esquivel, costs of goods sold will be credited in the consolidated worksheet for 2021?

Answer 2

Answer:

C. Inventory.

Explanation:

Inventory would be credited, because the company has sold it's inventory, and it is gone, so whatever goes out is always credited.