Monday, February 17, 2014

Consolidation of a variable Interest Entity


E3-12 Consolidation of a variable Interest Entity
Teal Corporation is the primary beneficiary of a variable interest entity with total assets of $500,000, Liabilities of $470,000, and owner’s equity of $30,000. Because Teal owns 25 percent of the VIE’s Voting stock, it reported a $7,500 investment in the VIE in its balance sheet. Teal reported total assets of $190,000 (including its investment in the VIE), Liabilities of $80,000, common stock of $15,000, and retained earnings of $95,000 in its balance sheet.
Required:
Prepare a condensed balance sheet in good form for Teal, taking into consideration that it is the primary beneficiary of the variable interest entity.


Solution
E3-12 Consolidation of a variable Interest Entity