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 50,000 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:

NewTune On-the-Go Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (110,000) $ (34,000)

Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (370,000) (50,000)

Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (400,000) (50,000)

Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . (30,000) (30,000)

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (860,000) (190,000)

Totals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(1,770,000) $(354,000)

Pacifica Seguros Book Values Seguros Fair Values Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,200,000)

Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 875,000

Net income . . . . . . . . . . . . . . . . . . . . . . . $ (325,000)

Retained earnings, 1/1 . . . . . . . . . . . . . . . . $ (950,000)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . (325,000)

Dividends declared . . . . . . . . . . . . . . . . . . 90,000

Retained earnings, 12/31 . . . . . . . . . . . . . . $ (1,185,000)

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 110,000 $ 85,000 $ 85,000

Receivables and inventory . . . . . . . . . . . . 750,000 190,000 180,000

Property, plant, and equipment . . . . . . . . 1,400,000 450,000 600,000

Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000 160,000 200,000

Total assets . . . . . . . . . . . . . . . . . . . . . . . . $ 2,560,000 $ 885,000

Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (500,000) $ (180,000) $ (180,000)

Common stock . . . . . . . . . . . . . . . . . . . . . . (400,000) (200,000)

Additional paid-in capital . . . . . . . . . . . . . . (475,000) (70,000)

Retained earnings . . . . . . . . . . . . . . . . . . . . (1,185,000) (435,000)

Total liabilities and equities . . . . . . . . . . $ (2,560,000) $ (885,000)

In addition, Pacifica assessed a research and development project underway at Seguros to have a fair value of $100,000. Although not yet recorded on its books, Pacifica paid legal fees of $15,000 in connection with the acquisition and $9,000 in stock issue costs. Prepare the following:

a. 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. (Use a 0.961538 present value factor where applicable.)

b. A post-acquisition column of accounts for Pacifica.

c. A worksheet to produce a consolidated balance sheet as of the acquisition date

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