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 thee 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:
In addition. Pacifica assessed a research and development project under way 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 S9,000 in stock issue costs. Prepare the following:
a. 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. (Use a 0.961538 Present value factor where applicable.)
b. A postacquisition column of accounts for Pacifica.
c. A worksheet to produce a consolidated balance sheet as of the acquisition date.
