On December 31, Pacifica, Inc., acquired 100 percent of the voting stock of Seguros Company. Pacifica will maintainSeguros as a wholly owned subsidiary with its own legal and accounting identity. The consideration transferred tothe owner of Seguros included 56,570 newly issued Pacifica common shares ($20 market value, $5 par value) andan agreement to pay an additional $130,000 cash if Seguros meets certain project completion goals by December31 of the following year. Pacifica estimates a 50 percent probability that Seguros will be successful in meeting thesegoals and uses a 4 percent discount rate to represent the time value of money.Immediately prior to the acquisition, the following data for both firms were available:SegurosSegurosBookFairPacificaValuesValues$(1,270,000)889,000(381,000)RevenuesExpensesNet income$Retained earnings, 1/1$(1,048,000)(381,000)139,000Net incomeDividends declaredRetained earnings, 12/31$(1,290,000)$ 121,000146,000457,000$ 121,000135,200623,500Cash2$125,000Receivables and inventoryProperty, plant, and equipmentTrademarks647,0001,590,000378,000227,000$ 951,000284,200Total assets$ 2,740,000Liabilities(575,000) $ (237,000) $ (237,000)$( 400,000)(475,000)(1,290,000)(200,000)(70,000)(444,000)Common stockAdditional paid-in capitalRetained earningsTotal liabilities and equities$(2,740,000) $(951,000)In addition, Pacifica assessed a research and development project under way at Seguros to have a fair value of$160,000. Although not yet recorded on its books, Pacifica paid legal fees of $17,300 in connection with theacquisition and $8,000 in stock issue costs.a. Prepare Pacifica's entries to account for the consideration transferred to the former owners of Seguros, the directcombination costs, and the stock issue and registration costs.b.&c. Present a worksheet showing the postacquisition column of accounts for Pacifica and the consolidatedbalance sheet as of the acquisition date.

Journal entries are those entries that are reported into the books of accounts of the company and it…

ember 31, Pacifica, Inc., acquired 100 percent of the voting stock of Seguros Compa s as a wholly owned subsidiary with its own legal and accounting identity. The consi er of Seguros included 56,570 newly issued Pacifica common shares ($20 market ement to pay an additional $130,000 cash if Seguros meets certain project complet e following year. Pacifica estimates a 50 percent probability that Seguros will be suc nd uses a 4 percent discount rate to represent the time value of money. ately prior to the acquisition, the following data for both firms were available: Seguros Book Seguros Fair Parifica Values Values

ember 31, Pacifica, Inc., acquired 100 percent of the voting stock of Seguros Compa s as a wholly owned subsidiary with its own legal and accounting identity. The consi er of Seguros included 56,570 newly issued Pacifica common shares ($20 market ement to pay an additional $130,000 cash if Seguros meets certain project complet e following year. Pacifica estimates a 50 percent probability that Seguros will be suc nd uses a 4 percent discount rate to represent the time value of money. ately prior to the acquisition, the following data for both firms were available: Seguros Book Seguros Fair Parifica Values Values

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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On December 31, Pacifica, Incorporated, acquired 100 percent of the voting stock of Seguros Company. Pacifica will maintain Seguros as a wholly owned subsidiary with its own legal and accounting identity. The consideration transferred to the owner of Seguros included 59,530 newly issued Pacifica common shares ($20 market value, $5 par value) and an agreement to pay an additional $130,000 cash if Seguros meets certain project completion goals by December 31 of the following year. Pacifica estimates a 50 percent probability that Seguros will be successful in meeting these goals and uses a 4 percent discount rate to represent the time value of money. Immediately prior to the acquisition, the following data for both firms were available: Revenues Expenses Net income Retained earnings, 1/1 Net income Dividends declared Retained earnings, 12/31 Cash Items Receivables and inventory Property, plant, and equipment Trademarks Total assets Liabilities Pacifica $ (2,150,000) 1,505,000 $ (645,000)…