Sanderson Corporation purchased 70 percent of the common stock of Kline Corporation on January \(1,20 \times 7\), for \(\$ 294,000\) in cash. The stockholders' equity accounts of the two companies at the date of purchase are:

\section*{Required}

a. What amount will be assigned to the noncontrolling interest on January 1, 20X7, in the consolidated balance sheet?

b. Prepare the consolidated stockholders' equity section of the balance sheet of Sanderson Corporation and its subsidiary, Kline Corporation, as of January 1, 20X7.

c. Sanderson purchased ownership of Kline to ensure a constant supply of electronic switches, which it purchases regularly from Kline. Why might Sanderson not feel compelled to purchase all of the shares of Kline?

Transcribed Image Text:

Common Stock ($10 par value) Additional Paid-In Capital Sanderson Corporation $400,000 Kline Corporation $180,000 65,000 175,000 222,000 Retained Earnings 358,000 Total Stockholders' Equity $980,000 $420,000