Pone Company purchased 100 percent of Sone Inc. on January 1, 20X9 for $625,000. Sone reported earnings of $76,000 and declared dividends of $8,000 during 20X9.
-Based on the preceding information and assuming Pone uses the cost method to account for its investment in Sone,what is the balance in Pone's Investment in Sone account on December 31,20X9,prior to consolidation?

Question

Quizplus · Accepted Answer

Using the cost method, Pone's Investment in Sone account will only reflect the initial cost of the investment. Therefore, the balance in the account will remain at $625,000 throughout the year, even after considering the earnings and dividends of Sone. Thus, the answer is B.

Pone Company Purchased 100 Percent of Sone Inc