Important Note To Instructors

Chapter 3 - THE REPORTING ENTITY AND CONSOLIDATION OF LESS-THAN-WHOLLY-OWNED
SUBSIDIARIES WITH NO DIFFERENTIAL
CHAPTER 3
THE REPORTING ENTITY AND CONSOLIDATION OF LESS-THAN-

WHOLLY-OWNED SUBSIDIARIES WITH NO DIFFERENTIAL
IMPORTANT NOTE TO INSTRUCTORS
The 12th edition uses a building block approach to our coverage of consolidation in
chapters 2 through 5. Chapter 2 introduces our coverage of consolidation in the most basic
setting when the subsidiary is either created or purchased at an amount equal to the book value of
the subsidiary’s underlying net assets.
 Chapter 3 explains how the basic consolidation process changes when the parent
company owns less than 100 percent of the subsidiary.
 Chapter 4 shows how the consolidation process differs when the parent company
acquires the subsidiary for an amount greater (or less) than the book value of the
subsidiary’s net assets.
 Finally, Chapter 5 presents the most complex consolidation scenario (where the parent
owns less than 100 percent of the subsidiary’s outstanding voting stock and the
acquisition price is not equal to the book value of the subsidiary’s net assets). In order to
facilitate this new approach, we emphasize that this edition includes consolidation entries
used in consolidation to facilitate the elimination of the investment in a subsidiary in two
steps: (1) first the book value portion of the investment and income from the subsidiary
are eliminated and (2) then the differential portion of the investment and income from the
subsidiary are eliminated with separate entries. We believe that this approach is more
intuitive for students.
Copyright © 2019 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior consent of McGraw-Hill
Education.
3-1
Chapter 03 - THE REPORTING ENTITY AND CONSOLIDATED FINANCIAL STATEMENTS
3-2
Education.
OVERVIEW OF CHAPTER 3
Chapter 3 is the second in a series of chapters that focuses on the preparation of

consolidated financial statements. The first portion of the chapter contains a discussion of the
usefulness of consolidated statements and when it is appropriate to prepare them. It then
identifies the stakeholders who are likely to find consolidated statements useful. It also discusses
some limitations of consolidated financial statements. The chapter also identifies and explains
(1) conditions needed to establish and exercise control and (2) other consolidation criteria.
Chapter 3 next explains the computation and presentation of the non-controlling interest.
It also discusses combined financial statements.
The chapter also explains and illustrates how consolidation differs when the parent
company owns less than 100 percent of the subsidiary.
The chapter next introduces special purpose and variable interest entities and explains
how accounting guidance and standards related to SPEs and VIEs currently differ between U.S.
GAAP and IFRS.
Finally, Appendix 3A provides a brief presentation of the consolidation of variable
interest entities.
3-3
Education.
LEARNING OBJECTIVES
When students finish studying this chapter, they should be able to:
LO 3-1 Understand and explain the usefulness and limitations of consolidated financial
statements.
LO 3-2 Understand and explain how direct and indirect control influence the
consolidation of a subsidiary.
LO 3-3 Understand and explain differences in the consolidation process when the
subsidiary is not wholly owned.
LO 3-4 Make calculations for the consolidation of a less-than-wholly-owned subsidiary.
LO 3-5 Prepare a consolidation worksheet for a less-than-wholly-owned subsidiary.
LO 3-6 Understand and explain the purpose of combined financial statements and how
they differ from consolidated financial statements.
LO 3-7 Understand and explain rules related to the consolidation of variable interest
entities.
LO 3-8 Understand and explain differences in consolidation rules under U.S. GAAP and
IFRS.
SYNOPSIS OF CHAPTER 3
The Reporting Entity and the

Consolidation of Less-than-Wholly-Owned Subsidiaries with No Differential
The Coca-Cola Company
statements.
The Usefulness of Consolidated Financial Statements

Limitations of Consolidated Financial Statements
Subsidiary Financial Statements
LO 3-2 Understand and explain how direct and indirect control influence the
consolidation of a subsidiary.
Consolidated Financial Statements: Concepts and Standards

Traditional View of Control
Indirect Control
Ability to Exercise Control
Differences in Fiscal Periods
Changing Concept of the Reporting Entity
LO 3-3 Understand and explain differences in the consolidation process when the
subsidiary is not wholly owned.
3-4
Education.
Noncontrolling Interest
Computation and Presentation of Noncontrolling Interest
The Effect of a Noncontrolling Interest

Consolidated Net Income
Consolidated Retained Earnings
Worksheet Format
Consolidated Balance Sheet with a Less-Than-Wholly-Owned Subsidiary

80 Percent Ownership Acquired at Book Value
Consolidation Subsequent to Acquisition—80 Percent Ownership Acquired at Book
Value
Initial Year of Ownership
Second and Subsequent Years of Ownership
LO 3-6 Understand and explain the purpose of combined financial statements and how
they differ from consolidated financial statements.
Combined Financial Statements
LO 3-7 Understand and explain rules related to the consolidation of variable interest
entities.
Special-Purpose and Variable Interest Entities

Variable Interest Entities
IFRS.
IFRS Differences in Determining Control of VIEs and SPEs
Appendix 3A: Consolidation of Variable Interest Entities
3-5
Education.
NOTES ON POWERPOINT SLIDES
We have attempted to provide PowerPoint slides that will be useful to a broad set of users. Since
instructors often have different styles and preferences, we have attempted to include slides that
will accommodate different approaches and that can be adapted to classes with different levels of
preparation. For example, some instructors prefer to introduce the material before students have
read the chapter. We have tried to facilitate these types of introductory discussions by including
slides that replicate key points from the chapter. Other instructors expect students to have read
the chapter and attempted homework problems before coming to class. As a result, they may not
find it useful to review all of the topics in the chapter or to include slides that simply review
many of the details they expect students to study before class. However, instructors following
this approach often like to use sample exercises and problems built into the slides that allow
them to have extended discussions or to facilitate group interaction in class.
If instructors elect to spend two class periods on the same subject, they might find a combination
of both styles to be useful by first introducing foundational material before students have read
the chapter and studied the topic, followed by an extended discussion the next class period after
students have read the chapter and attempted homework problems.

We have tried to develop slides that can facilitate a flexible approach to allow instructors to
select the slides that best match their objectives and style for class discussions. This is the reason
we are including over 100 slides for some chapters in the text. We do not expect all instructors to
use all slides, but the slide files should help support different teaching approaches and allow
instructors to select the subset of slides that best matches their specific discussion objectives.
The slides are organized by learning objective. We have included a slide at the beginning of each
learning objective to show where the new material begins. Instructors may or may not want to
use these learning objective slides in class. We provide them primarily as a way of organizing
the material. We also include short multiple choice questions at the end of most learning
objectives. Some instructors find it useful to pause periodically during class to assess students’
level of understanding. For this reason, we include several “practice quiz questions” that can be
used throughout class discussions to engage students, help them focus on key points, or to
facilitate group interaction. Finally, we provide longer exercises and problems that many
instructors find useful in assessing understanding and encouraging group learning.
statements.
 Slides 3-8 summarize basic concepts related to LO 3-1.
 Instructors should choose slides from this LO that they deem most important to
emphasize to their students.
LO 3-2 Understand and explain how direct and indirect control influence the consolidation of
a subsidiary.
3-6
Education.
LO 3-3 Understand and explain differences in the consolidation process when the subsidiary
is not wholly owned.
 Slides 24-29 emphasize the need for full (as opposed to proportional) consolidation
and where the noncontrolling interest should be reported in the financial statements.

 Slide 33 explains that the only change in the procedures for consolidation in chapter 3
(relative to chapter 2) relate to the fact that we don’t own 100% of the subsidiary.
 Slides 34-35 explain how procedures for preparing the basic consolidation entry
differ when the subsidiary is not wholly owned.
 Slides 36-41 summarize the basic concepts related to LO 3-4.
 Slides 44-47 contain a group or individual exercise to help students understand these
differences. We generally use this exercise in small groups to walk students through
the book value calculations leading up to the basic consolidation entry. The only
difference from chapter 2 is that the investment account only includes 70% of the
book value and the remaining 30% is assigned to the NCI shareholders. We give
students approximately 5 minutes to try to fill in the amounts in the table on slide 44
while working with their groups. With slide 45, we show students the answer to the
book value calculations, link the beginning and ending balances in the investment
account in the table to the T-account, and then ask students to prepare the basic
consolidation entry. We give students 3-4 minutes to work on this in their groups.
 Slides 49-78 summarize the basic concepts related to LO 3-5.

 Slides 57-66 provide a comprehensive example of a consolidation with no differential
where the parent owns less the 100% of the voting shares outstanding. On slide 58,
we ask students to go through the book value calculations in their groups. On slide
59, we show students the answer to these calculations and then ask students to
prepare the basic consolidation entry. We give students 3-4 minutes to work on this in
their groups. On slide 61, we show students the basic consolidation entry and ask
them to complete the worksheet. We give students about 10 minutes to work through
the worksheet. We usually remind students that the big change is that there are two
extra lines in the income statement section for dividing total consolidated net income
between the NCI and CI (controlling) shareholders.
LO 3-6 Understand and explain the purpose of combined financial statements and how they
differ from consolidated financial statements.
3-7
Education.
LO 3-7 Understand and explain rules related to the consolidation of variable interest entities.
 Slides 85-100 summarize the concepts related to LO 3-7.
 Slides 85-90 introduce the reason for changes in the traditional “voting control”
requirements for consolidation and define SPEs and VIEs. Specifically, these slides
use the Enron example to introduce the reason for the change in accounting standards
to capture previously unconsolidated entities. Slide 85 notes the decline in stock price
at the time Arthur Andersen announced the restatement in October of 2001. We note
that the diagram in slide 89 is too complex to describe in detail. We merely use it to
illustrate that many of the transactions in which Enron was engaged were very
complex. We also note that one of the problems was that some of these entities were
not “arm’s length” to Enron because they had officers who were also officers of
Enron. We use the table in slide 90 to illustrate how significant the raptor transactions
were to Enron (approximately 1/3 of reported earnings).
 Slides 91-92 provide a more detailed definition of VIEs.
 Slide 93 is highly animated. Instructors should avoid going too deep into details. We
use this example to illustrate that considering lease characteristics is not enough. A
company must also determine whether it has an unusual investment relationship with
the leasing company that might indicate that ABC Corp. (in this example) has an
ownership interest based on residual risks and benefits. A primary beneficiary
according to ASC 810 is a variable interest that absorbs a majority of the expected
loss or receives a majority of the expected residual return of the VIE. If ABC were to
guarantee the building’s value or they were to receive (by contract) any value of the
building over the $100k, they would be the primary beneficiary, and would have to
consolidate Leasing Corp. Interestingly, before ASC 810, ABC Corp. probably would
not have had to consolidate this arrangement.
 Slides 94-96 provide additional details about VIEs and requirements for the primary
beneficiary to consolidate a VIE.
 Slides 97-100 can be used as an individual or group exercise. This is a good example
to illustrate relationships that could result in a company being named the primary
beneficiary of a VIE. We usually diagram the facts on the board as we read through
them with students and ask if there is anything here that would raise a red flag for the
students.
IFRS.
 Slides 106-109 summarize basic concepts related to LO 3-8. We usually do not go
into a lot of detail here. We merely point out the differences mentioned here and
quickly point them out on the three summary slides (107-109) without pausing for
discussion.
TEACHING IDEAS
3-8
Education.
1. Students may be asked to explain why companies do not consolidate all subsidiaries.
Then, they could be asked to choose a large company with many subsidiaries and
investments and to find examples of investments that are not consolidated. (For example,
large insurance groups often have many consolidated subsidiaries. In addition, some have
affiliated but non-consolidated mutual companies.)
2. Students may be asked to prepare a written memo on how a company could have de facto
(in fact) control over another company without having de jure (majority of voting stock)
control. Students could discuss alternative financing arrangements with very restrictive
covenants, purchase of virtually all of another company's productive output, leasing
arrangements, and other related affiliations. The FASB continues to have a consolidations
project on its agenda. Some countries allow for consolidation based on de facto control.
Students could be asked to evaluate the potential difficulties of deciding which
controlling company should consolidate the controlled company in a case in which an
investing company (X) has a majority ownership of the voting stock of the controlled
company (Z), but a third party (Y) has de facto control of the controlled company (Z).
Can company Z be consolidated by both companies X and Y?
3. Students could be asked to choose a large consolidated entity that holds an interest in a
special purpose entity or variable interest entity. Students can choose a company or
conduct a keyword web search. Students should then describe how the company accounts
for the entity and what disclosures it makes regarding the investment.
3-9
Education.
DESCRIPTIONS OF CASES, EXERCISES, AND PROBLEMS
C3-1 Computation of Total Asset Values

12 min. In answering this case, each of the major items that will cause total assets
LO 3-5 reported in the consolidated balance sheet to differ from the sum of the assets
E reported by the individual companies should be discussed. This case is a good
test of basic understanding of the consolidation process.
C3-2 Accounting Entity [AICPA Adapted]

30 min. Some students have little understanding of the concept of an accounting entity.
LO 3-3, This question deals with the concept of an entity and draws attention to the fact
LO 3-7 that there are many accounting entities that are not legal entities.
M
C3-3 What Company is That?
20 min. Students are required to identify some of the well-known brand names from
LO 3-1 Viacom’s subsidiaries, ConAgra Foods, and Yum! Brands.
E
C3-4 Subsidiaries and Core Businesses
25 min. Students must acquire information about subsidiaries owned by General Electric,
LO 3-1 Sears Roebuck, and PepsiCo and evaluate whether meaningful information can
M be provided when businesses that are considerably different in nature are
A consolidated.
C3-5 Consolidation Differences among Major Companies

25 min. Students must review the organizational structure of Union Pacific Corporation
LO 3-6 and ExxonMobil Corporation and determine accounting methods used for
M subsidiaries.
3-10
Education.
E3-1 Multiple-Choice Questions on Consolidation Overview [AICPA Adapted]

15 min. Four multiple-choice questions deal primarily with the issue of when
LO 3-1, consolidated statements should be prepared.
LO 3-2
E
E3-2 Multiple-Choice Questions on Variable Interest Entities
15 min. Four multiple-choice questions address issues related to variable interest and
LO 3-7 special purpose entities.
E
E3-3 Multiple-Choice Questions on Consolidated Balances [AICPA Adapted]
15 min. Three multiple-choice questions deal with a variety of basic issues related to the
LO 3-5 consolidation process.
E
E3-4 Multiple-Choice Questions on Consolidation Overview [AICPA Adapted]
12 min. Four multiple-choice questions deal with a variety of basic issues related to the
LO 3-2, consolidation process.
LO 3-3
E
E3-5 Balance Sheet Consolidation
15 min. Students must calculate four balance sheet amounts immediately after acquisition
LO 3-5 of 100% of the outstanding voting stock of an entity. These include total assets
E on the parent’s balance sheet and total assets, liabilities, and stockholders equity
of the consolidated entity.
E3-6 Balance Sheet Consolidation with Intercompany Transfer

15 min. Students must calculate four totals immediately after acquisition of 100% of the
LO 3-5 outstanding voting stock of an entity. These include total assets on the parent’s
M balance sheet and total assets, liabilities, and stockholders equity of the
consolidated entity.
3-11
Education.
E3-7 Subsidiary Acquired for Cash

20 min. A simple consolidated balance sheet is prepared following an acquisition of
LO 3-5 subsidiary shares using cash.
M
E3-8 Subsidiary Acquired with Bonds
20 min. A simple consolidated balance sheet is prepared following the acquisition of
LO 3-5 subsidiary shares by issuing parent company bonds.
M
E3-9 Subsidiary Acquired By Issuing Preferred Stock
20 min. A consolidated balance sheet is prepared following the acquisition of subsidiary
LO 3-5 shares by issuing preferred stock of the parent company.
M
E3-10 Reporting for a Variable Interest Entity
20 min. A balance sheet must be prepared immediately following the construction of a
LO 3-4, casino by a variable interest entity.
LO 3-7
M
E3-11 Consolidation of a Variable Interest Entity
15 min. A consolidated balance sheet must be prepared for the primary beneficiary of a
LO 3-4, variable interest entity.
LO 3-7
E
E3-12 Computation of Subsidiary Net Income
5 min. Income assigned to noncontrolling interest in the consolidated income statement
LO 3-3 is used to compute the reported net income of the subsidiary.
E
E3-13 Incomplete Consolidation
20 min. A partially-completed consolidated balance sheet is presented. The proportion of
LO 3-3, ownership held by the parent and the amounts to be reported in the consolidated
LO 3-4 balance sheet for accounts payable, bonds payable, and the stockholders' equity
H accounts must be determined.
E3-14 Noncontrolling Interest

10 min. Stockholders’ equity balances are given for the parent and subsidiary. The
LO 3-3, amount assigned to the noncontrolling interest in the consolidated balance sheet
LO 3-4 must be computed and the stockholders’ equity section of the consolidated
E balance sheet prepared.
E3-15 Computation of Consolidated Net Income

15 min. An entity utilized the cost method in accounting for its 75% ownership in another
LO 3-3, entity. Students must calculate the investor’s income from its investment under
LO 3-4 the equity method, income to the noncontrolling interest, and consolidated
M income. Students must also explain why the investor should not simply add the
investee’s reported income to its own reported income.
3-12
Education.
E3-16 Computation of Subsidiary Balances

15 min. Students must calculate the amount of net income reported by the subsidiary
LO 3-4 based on income assigned to noncontrolling interest and prepare the
M stockholders’ equity section of the subsidiary’s balance sheet.
E3-17 Subsidiary Acquired at Net Book Value

10 min. Balance sheet information for the parent and subsidiary is provided prior to the
LO 3-4, acquisition of all subsidiary common shares at net book value. A consolidated
LO 3-5 balance sheet must be prepared.
E
E3-18 Acquisition of Majority Ownership
15 min. Students must compute amounts to be reported for net identifiable assets,
LO 3-4 goodwill, and noncontrolling interest after a combination of companies under
E current accounting practice.
P3-19 Multiple-Choice Questions on Consolidated and Combined Financial

15 min. Statements [AICPA Adapted]
LO 3-4, Two multiple-choice questions require a more advanced understanding of the
LO 3-6 consolidation process.
E
P3-20 Determining Net Income of Parent Company
15 min. Given consolidated income and income of minority owners, students must
LO 3-4 calculate parent’s income from its own operations.
M
3-13
Education.
P3-21 Consolidation of a Variable Interest Entity

20 min. Students must prepare a consolidated balance sheet for an entity that is the
LO 3-7 primary beneficiary of a partnership.
M
P3-22 Reporting for Variable Interest Entities
20 min. A balance sheet must be prepared for the entity that is the primary beneficiary of
LO 3-7 a variable interest entity.
M
P3-23 Parent Company and Consolidated Amounts
25 min. A trial balance for the investee company and information regarding the parent’s
LO 3-4 income are provided. Students must calculate the cost of the investment, income
M of minority shareholders, and consolidated net income given two separate
scenarios.
P3-24 Parent Company and Consolidated Balances
20 min. Students must calculate amount of the excess of investment cost over book value,
LO 3-4 the amount by which building and equipment and associated accumulated
M depreciation will be increased on the consolidated balance sheet, and the amount
reported for the minority shareholders.
P3-25 Indirect Ownership

25 min. Consolidated net income must be computed. The student's understanding of the
LO 3-2, definition of consolidated net income is tested by increasing the number of
LO 3-4 companies involved and including both subsidiaries and nonsubsidiaries.
H NOTE: This problem is not covered directly in the chapter material.
P3-26 Consolidated Worksheet at and Balance Sheet on the Acquisition Date

25 min. (Equity Method)
LO 3-4, Students are asked to prepare journal entries on a parent company’s books at the
LO 3-5 time of an acquisition and then to prepare a consolidation worksheet and balance
M sheet on the acquisition date.
Ws
P3-27 Consolidated Worksheet at End of the First Year of Ownership (Equity
30 min. Method)
LO 3-4, As a continuation of P3-26, students are asked to prepare equity method journal
LO 3-5 entries on a parent company’s books related to the subsidiary and then to prepare
M a consolidation worksheet at the end of the first year.
P3-28 Consolidated Worksheet at End of the Second Year of Ownership (Equity

30 min. Method)
M a consolidation worksheet at the end of the second year.
3-14
Education.
P3-29 Consolidated Worksheet and Balance Sheet on the Acquisition Date (Equity
25 min. Method)
LO 3-4, Students are asked to prepare journal entries on a parent company’s books at the
LO 3-5 time of an acquisition and then to prepare a consolidation worksheet and balance
M sheet on the acquisition date.
P3-30 Consolidated Worksheet at End of the First Year of Ownership (Equity

35 min. Method)
M a consolidation worksheet at the end of the first year.
P3-31 Consolidated Worksheet at End of the Second Year of Ownership (Equity

35 min. Method)
M a consolidation worksheet at the end of the second year.
3-15
Education.
OTHER RESOURCES
Chapter 3
Comparison of Various Theories of Consolidation
On January 1, 20X9, Pat Company acquired 75 percent of the common stock of Small Company
for $330,000. At that date, Small Company reported the balance shown below. During 20X9,
Small reported sales of $100,000. Building and equipment is depreciated over 20 years and
goodwill is amortized over 5 years.
Small Company
Balance Sheet
January 1, 20X9
Book Value Fair Value

Land $ 100,000 $ 160,000
Buildings and Equipment 200,000 $ 320,000
Assets $ 300,000 $ 480,000
Accounts Payable $ 80,000 $ 80,000

Common Stock 100,000
Retained Earnings 120,000
Liab. & Equity $ 300,000 $ 80,000
3-16
Education.
The dollar amounts reported in the consolidated financial statements following the acquisition will be:
Proprietary Parent Entity

Theory Company Theory
Land $ 120,000 $ 145,000 $ 160,000
Buildings and Equipment 240,000 290,000 320,000
Accounts Payable 60,000 80,000 80,000
Goodwill 30,000 30,000 40,000
Noncontrolling Interest -0- 55,000 110,000
Sales 75,000 100,000 100,000
Depreciation Expense 12,000 14,500 16,000
Amortization Expense 6,000 6,000 8,000

(on Goodwill)
The Entity Theory is the current approach embraced by the FASB.
3-17
Education.

Important Note To Instructors

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Chapter 3 - THE REPORTING ENTITY AND CONSOLIDATION OF LESS-THAN-WHOLLY-OWNED

SUBSIDIARIES WITH NO DIFFERENTIAL

THE REPORTING ENTITY AND CONSOLIDATION OF LESS-THAN-

IMPORTANT NOTE TO INSTRUCTORS

Chapter 3 is the second in a series of chapters that focuses on the preparation of

The Reporting Entity and the

The Coca-Cola Company

The Usefulness of Consolidated Financial Statements

Consolidated Financial Statements: Concepts and Standards

LO 3-4 Make calculations for the consolidation of a less-than-wholly-owned subsidiary.

The Effect of a Noncontrolling Interest

LO 3-5 Prepare a consolidation worksheet for a less-than-wholly-owned subsidiary.

Consolidated Balance Sheet with a Less-Than-Wholly-Owned Subsidiary

Combined Financial Statements

Special-Purpose and Variable Interest Entities

IFRS Differences in Determining Control of VIEs and SPEs

Appendix 3A: Consolidation of Variable Interest Entities

NOTES ON POWERPOINT SLIDES

LO 3-4 Make calculations for the consolidation of a less-than-wholly-owned subsidiary.

LO 3-5 Prepare a consolidation worksheet for a less-than-wholly-owned subsidiary.

 Slides 49-78 summarize the basic concepts related to LO 3-5.

DESCRIPTIONS OF CASES, EXERCISES, AND PROBLEMS

C3-1 Computation of Total Asset Values

C3-2 Accounting Entity [AICPA Adapted]

C3-5 Consolidation Differences among Major Companies

E3-1 Multiple-Choice Questions on Consolidation Overview [AICPA Adapted]

E3-6 Balance Sheet Consolidation with Intercompany Transfer

E3-7 Subsidiary Acquired for Cash

E3-14 Noncontrolling Interest

E3-15 Computation of Consolidated Net Income

E3-16 Computation of Subsidiary Balances

E3-17 Subsidiary Acquired at Net Book Value

P3-19 Multiple-Choice Questions on Consolidated and Combined Financial

P3-21 Consolidation of a Variable Interest Entity

P3-25 Indirect Ownership

P3-26 Consolidated Worksheet at and Balance Sheet on the Acquisition Date

P3-28 Consolidated Worksheet at End of the Second Year of Ownership (Equity

P3-30 Consolidated Worksheet at End of the First Year of Ownership (Equity

P3-31 Consolidated Worksheet at End of the Second Year of Ownership (Equity

Book Value Fair Value

Accounts Payable $ 80,000 $ 80,000

Proprietary Parent Entity

Land $ 120,000 $ 145,000 $ 160,000

Buildings and Equipment 240,000 290,000 320,000

Accounts Payable 60,000 80,000 80,000

Goodwill 30,000 30,000 40,000

Noncontrolling Interest -0- 55,000 110,000

Sales 75,000 100,000 100,000

Depreciation Expense 12,000 14,500 16,000

Amortization Expense 6,000 6,000 8,000

The Entity Theory is the current approach embraced by the FASB.

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