On December 31, Pacifica, Incorporated, 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 59,530 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 Items Receivables and inventory Property, plant, and equipment Trademarks Total assets Liabilities Common stock Additional paid-in capital Retained earnings Pacifica $ (2,150,000) 1,505,000 $ (645,000) Seguros Book Seguros Fair Values Values 0 0 0 0 $ (1,013,000) (645,000) 183,000 $ (1,475,000) $ 173,000 811,000 1,530,000 368,000 $ 2,882,000 $ 1,009,000 $ (532,000) (400,000) (475,000) (1,475,000) (70,000) (481,000) A $ $ (2,882,000) (1,009,000) 0 0 0 $ 105,000 174,000 496,000 234,000 0 0 0 0 0 0 0 $ 105,000 154,100 695,500 279,000 0 (258,000) $ (258,000) (200,000) 0 Total liabilities and equities. In addition, Pacifica assessed a research and development project under way at Seguros to have a fair value of $197,000. Although not yet recorded on its books, Pacifica paid legal fees of $19,100 in connection with the acquisition and $9,700 in stock issue costs. 0 Required: a. Prepare Pacifica's journal entries to record the consideration transferred to the former owners of Seguros, the direct combination costs, and the stock issue and registration costs. h and Present a worksheet showing the nostacquisition column of accounts for Pacifica and the consolidated balance sheet as of
On December 31, Pacifica, Incorporated, 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 59,530 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 Items Receivables and inventory Property, plant, and equipment Trademarks Total assets Liabilities Common stock Additional paid-in capital Retained earnings Pacifica $ (2,150,000) 1,505,000 $ (645,000) Seguros Book Seguros Fair Values Values 0 0 0 0 $ (1,013,000) (645,000) 183,000 $ (1,475,000) $ 173,000 811,000 1,530,000 368,000 $ 2,882,000 $ 1,009,000 $ (532,000) (400,000) (475,000) (1,475,000) (70,000) (481,000) A $ $ (2,882,000) (1,009,000) 0 0 0 $ 105,000 174,000 496,000 234,000 0 0 0 0 0 0 0 $ 105,000 154,100 695,500 279,000 0 (258,000) $ (258,000) (200,000) 0 Total liabilities and equities. In addition, Pacifica assessed a research and development project under way at Seguros to have a fair value of $197,000. Although not yet recorded on its books, Pacifica paid legal fees of $19,100 in connection with the acquisition and $9,700 in stock issue costs. 0 Required: a. Prepare Pacifica's journal entries to record the consideration transferred to the former owners of Seguros, the direct combination costs, and the stock issue and registration costs. h and Present a worksheet showing the nostacquisition column of accounts for Pacifica and the consolidated balance sheet as of
Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization
Section: Chapter Questions
Problem 62P
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Transcribed Image Text:On December 31, Pacifica, Incorporated, 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 59,530 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
Items
Receivables and inventory
Property, plant, and equipment
Trademarks
Total assets
Liabilities
Pacifica
$ (2,150,000)
1,505,000
$ (645,000)
Seguros Book Seguros Fair
Values
Values
0
0
0
0
0
0
0
$ (1,013, 000)
(645,000)
183,000
$ (1,475,000)
$ 173,000
811,000
1,530,000
368,000
$ 2,882,000 $ 1,009,000
$ (532,000)
(258,000) $ (258,000)
(400,000)
(200,000)
(70,000)
(475,000)
(1,475,000)
(481,000)
$ (2,882,000) (1,009,000)
$ 105,000
174,000
496,000
234,000
0
0
$
000
0
0
$ 105,000
154,100
695,500
279,000
0
Common stock
Additional paid-in capital
Retained earnings
Total liabilities and equities
In addition, Pacifica assessed a research and development project under way at Seguros to have a fair value of $197,000. Although not
yet recorded on its books, Pacifica paid legal fees of $19,100 in connection with the acquisition and $9,700 in stock issue costs.
0
0
0
0
Required:
a. Prepare Pacifica's journal entries to record the consideration transferred to the former owners of Seguros, the direct combination
costs, and the stock issue and registration costs.
h and Present a worksheet showing the nostacquisition column of accounts for Pacifica and the consolidated balance sheet as of
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