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 58,635 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 Pacifica $ (1,700,000) 1,190,000 $ (510,000) $ (1,035,000) (510,000) 130,000 Seguros Seguros Book Values Fair Values 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 $ (1,415,000) $ 123,000 $ 129,000 $ 129,000 689,000 105,000 87,000 1,730,000 498,000 696,500 315,000 177,000 222,200 $ 909,000 $ 2,857,000 $ (567,000) $ (190,000) $ (190,000) (400,000) (200,000) Additional paid-in capital Retained earnings Total liabilities and equities (475,000) (1,415,000) (70,000) (449,000) $(2,857,000) $ (909,000) In addition, Pacifica assessed a research and development project under way at Seguros to have a fair value of $166,000. Although not yet recorded on its books, Pacifica paid legal fees of $19,900 in connection with the acquisition and $8,100 In stock issue costs.