Which accounts differ on the consolidated balance sheet when Entity Theory compared to Parent Company Extension Theory?
A) The investment in subsidiary balance and the consolidated retained earnings balance.
B) The goodwill balance and the consolidated retained earnings balance.
C) The goodwill balance and the non-controlling interest balance.
D)The investment in subsidiary balance and the non-controlling interest balance.

Question

Quizplus · Accepted Answer

In Entity Theory, only the parent company's accounts are reported, while in Parent Company Extension Theory, both the parent and subsidiary's accounts are reported. Therefore, the goodwill balance will differ on the consolidated balance sheet between the two theories because it is only recognized when a subsidiary is involved. Additionally, the non-controlling interest balance will also differ because it represents the portion of the subsidiary that is not owned by the parent company, which is only reported on the consolidated balance sheet in the Parent Company Extension Theory.

Which Accounts Differ on the Consolidated Balance Sheet When Entity