On December 31, Pacifica, Inc., 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 56,105 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 Receivables and inventory Property, plant, and equipment Trademarks Total assets Liabilities Common stock Additional paid-in capital Retained earnings Total liabilities and equities Seguros Seguros Pacifica Book Values Fair Values $(1,480,00) 1,036, eee $ (444,890) $(1,283, ) (444, eee) 167, eee $(1,280, 800) $ 7,800 $ Bee $ 96, eee 195, eee 94, eee 77,200 2, eee, eee 507,809 786, eee 351, eee 235,000 292,400 $ 2,683,800 $ 932,800 $ (528,800) $ (214,800) $ (214,800) (480,000) (280, 800) (475, eee) (70,000) (1,280,000) (448, 800) $(2,683,800) $ (932, eee) In addition, Pacifica assessed a research and development project under way at Seguros to have a fair value of $129.000. Although not yet recorded on its books, Pacifica paid legal fees of $18,000 in connection with the acquisition and $9.100 in stock issue costs. a. Prepare Pacifica's entries to account for the consideration transferred to the former owners of Seguros, the direct combination costs. and the stock issue and registration costs. b.&c. Present a worksheet showing the postacquisition column of accounts for Pacifica and the consolidated balance sheet as of the acquisition date. Reg A Reg B and C Prepare Pacifica's entries to account for the consideration transferred to the former owners of Seguros, the direct combination costs, and the stock issue and registration costs. (Use a 0.961538 present value factor where applicable. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the acquisition of Seguros Company. Note: Enter debits before credits. Transaction General Journal Debit Credit 1 Record entry Clear entry View general journal View transaction list Journal entry worksheet Record the legal fees related to the combination. Note: Enter debits before credits Transaction General Journal Debit Credit 2 Record entry Clear entry View general journal Reg A ReqB and C > Journal entry worksheet Record the payment of stock issuance costs. Note: Enter debits before credits General Journal Debit Credit Transaction 3 Record entry Clear entry View general journal
Show less PACIFICA, INC. AND SEGUROS CO. Consolidation Worksheet For Year Ending December 31 Consolidation Entries Accounts Pacifica Seguros Debit Credit Consolidated Totals Revenues Expenses Net income Retained earnings, 1/1 Net income Dividends declared Retained earnings, 12/31 Cash Receivables and inventory Property, plant and equipment Investment in Seguros Research and development asset Goodwill Trademarks Total assets Liabilities Contingent performance obligation Common stock Additional paid-in capital Retained earnings Total liabilities and equities
