Although Sloan Company had good earnings reports in 20X5 and 20X6, it had a negative retained earnings balance on December 31, 20X6 Jacobs Corporation purchased 100 percent of Sloans common stock on January 1, 20X7 Required a Explain how Sloans negative retained earnings balance is reflected in the...

Net assets of the subsidiary increase when positive earnings results occur and decrease when negativ ...

Although Sloan Company had good earnings reports in 20X5 and 20X6, it had a negative retained earnings

Question:

Although Sloan Company had good earnings reports in 20X5 and 20X6, it had a negative retained earnings balance on December 31, 20X6. Jacobs purchased 100 percent of Sloan’s on January 1, 20X7.

Required
a. Explain how Sloan’s negative retained earnings balance is reflected in the consolidated immediately following the acquisition.
b. Explain how the existence of negative retained earnings changes the consolidation worksheet entries.
c. Can be recorded if Jacobs pays more than book value for Sloan’s shares? Explain.

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