Raymond Company owns 90% of Rachel Company.Rachel Company owns 10% of Raymond Company.The treasury stock method is used.On the books of Rachel Company,we maintain the Investment in Raymond using the ________ method.The ending balance in Investment in Raymond is ________ stockholders' equity in the consolidated balance sheet.

Question

Quizplus · Accepted Answer

The treasury stock method is used when calculating the ownership percentage of the parent company. Therefore, the correct method to use on the books of Rachel Company is the cost method. Since Rachel owns 10% of Raymond, this investment is considered a minority interest and is deducted from the consolidated balance sheet. Therefore, the ending balance in Investment in Raymond is deducted from the stockholders' equity in the consolidated balance sheet.

Raymond Company Owns 90% of Rachel Company