Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed

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 56,480 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: Seguros Book Values Seguros Fair Values $ $ 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 Pacifica $(2,010,000) 1,407,000 $ (603,000) $ (954,000) (603,000) 124,000 $(1,433,000) $ 129,000 293,000 2,090,000 331,000 $ 2,843,000 $ (535,000) (400,000) (475,000) (1,433,000) $(2,843,000) 135,000 81,000 698,500 253,600 $ 135,000 92,000 504,000 209,000 940,000 (197,000) (200,000) (70,000) (473,000) (940,000) $ $ (197,000) $ In addition, Pacifica assessed a research and development project under way at Seguros to have a fair value of $131,000. Although not yet recorded on its books, Pacifica paid legal fees of $17,700 in connection with the acquisition and $9,900 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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Contemporary Debates On Politics And Public Administration In The Postmodern Era

Authors: Ă–mer Ugur, Kadir Caner Dogan

1st Edition

3631796331, 9783631796337

More Books

Students also viewed these Accounting questions

Question

Distinguish between operating mergers and financial mergers.

Answered: 1 week ago

Question

=+What is the brand's character or personality?

Answered: 1 week ago