Recording the initial Investment in Subsidiary is the same whether the Cost Method or the Equity Method is applied. The method of payment in this example is cash, but other sources of funds could also be used to pay for the investment (i.e. issuance of stock). Maintaining the investment in Subsidiary is where significant differences exist between the Cost Method and Equity Method, creating the need for different workpaper entries. Maintaining "Investment in Subsidiary" account using the Cost Method could be described as NOT maintaining the "Investment in Subsidiary" account. Under the Cost Method there is no adjustment to the "Investment in Subsidiary" account balance (with the exception of instances where a liquidating dividend occurs). Thus, the only investment related entry, after the initial investment (purchase) entry, is the recording of dividend income. When a dividend is received the parent company makes the following investment related entry: As you can see by the entry above the investment in subsidiary account is not affected. Therefore, the balance of the investment in subsidiary remains at the initial investment cost recorded on the date of acquisition