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 51,695 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:

	Pacifica				Seguros Book Values				Seguros Fair Values
Revenues	$	(1,810,000	)
Expenses		1,267,000
Net income	$	(543,000	)
Retained earnings, 1/1	$	(1,031,000	)
Net income		(543,000	)
Dividends declared		96,000
Retained earnings, 12/31	$	(1,478,000	)
Cash	$	198,000			$	134,000			$	134,000
Receivables and inventory		267,000				89,000				74,400
Property, plant, and equipment		2,000,000				446,000				598,500
Trademarks		398,000				240,000				299,000
Total assets	$	2,863,000			$	909,000
Liabilities	$	(510,000	)		$	(204,000	)		$	(204,000	)
Common stock		(400,000	)			(200,000	)
Additional paid-in capital		(475,000	)			(70,000	)
Retained earnings		(1,478,000	)			(435,000	)
Total liabilities and equities	$	(2,863,000	)		$	(909,000	)

In addition, Pacifica assessed a research and development project under way at Seguros to have a fair value of $106,000. Although not yet recorded on its books, Pacifica paid legal fees of $15,200 in connection with the acquisition and $11,200 in stock issue costs.

a. Prepare Pacificas 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.

Present a worksheet showing the postacquisition column of accounts for Pacifica and the consolidated balance sheet as of the acquisition date. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Round your answers to the nearest whole dollar.)

1. Record the acquisition of Seguros Company.

2. Record the legal fees related to the combination.

3. Record the payment of stock issuance costs.

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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	$0	$0			$0
Liabilities
Contingent performance obligation
Common stock
Additional paid-in capital
Retained earnings
Total liabilities and equities	$0	$0	$0	$0	$0