ABSTRACT: This instructional resource case presents an integrative approach to developing critical thinking and problem solving skills in the areas of partnership accounting and consolidated financial statements, including financial reporting for companies under common control—two subjects typically studied independently. The case shows that, in the presence of related-party transactions, a conventional partnership income statement may not be useful for assessing either the reasonableness of partnership income distributions or partnership profitability. The case enhances critical thinking by requiring the student to seek an alternative financial reporting solution to a related-party transaction of entities under common control typically not addressed in textbooks and college courses on advanced financial accounting. It can also be expanded to show how accounting may play a role in confronting ethical issues among partners.
