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differences between cost, equity, and consolidated methods

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What are the differences among the cost, equity, and consolidated methods of accounting?

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Solution Summary

This solution presents a comprehensive discussion about the differences in the three methods including the reasons for the different methods of reporting activity of a partially owned entity.

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All three methods report an ownership interest or position in another entity, but how that ownership is reported in the acquiring company is quite different.

The cost method is used when a company buys an interest in another entity but has no influence over the operations of the other entity. For example, your company may buy stock in General Electric. That investment will be reported on the balance sheet of your company at cost. Under normal circumstances, the recorded value will never change. When you receive ...

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