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 80 percent of the common stock of Sloan on January 1, 20X7.

\section*{Required}

a. Indicate how the negative retained earnings balance of Sloan Company is reflected in the consolidated balance sheet immediately following the acquisition.

\(b\). Indicate how the existence of negative retained earnings changes the consolidation workpaper entries.

c. Can goodwill be recorded if Jacobs Corporation pays more than book value for the shares of Sloan Company? Explain.