20. The following book and fair values were available for Westmont Company as of March 1.

Inventory
Land
Buildings
Customer relationships
Accounts payble
Common stock
Additional paid-in capital
Retained earnings 1/1
Revenues
Expenses

Book Value
$630,000
750,000
1,700,000
0
(80,000)
(2,000,000)
(500,000)
(360,000)
(420,000)
280,000

Fair Value
$600,000
990,000
2,000,000
800,000
(80,000)

Arturo Company pays $ 4,000,000 cash and issues 20,000 shares of its $ 2 par value common stock (
for all of Westmonts common stock in a merger, after which Westmont will cease to exist as a separa
Stock issue costs amount to $ 25,000 and Arturo pays $ 42,000 for legal fees to complete the transac
Prepare Arturos journal entry to record its acquisition of Westmont.

21. Use the same facts as in problem 20, but assume instead that Arturo pays cash of $ 4,200,000 to
Prepare Arturos journal entry to record its acquisition of Westmont.

32. On December 31, 2014, Pacifica, Inc., acquired 100 percent of the voting stock of Seguros Compa
subsidiary with its own legal and accounting identity. The consideration transferred to the owner of Se
common shares ($ 20 market value, $ 5 par value) and an agreement to pay an additional $ 130,000
goals by December 31, 2015. Pacifica estimates a 50 percent probability that Seguros will be successf
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, 1/1/14
Net income
Dividends declared
Retained earnings, 12/31/14
Cash
Receivables and inventory
Property, plant, and equipment
Trademarks
In process R&D

Pacifica
(1,200,000)
875,000
(325,000)
(950,000)
(325,000)
90,000
(1,185,000)
110,000
750,000
1,400,000
300,000

Seguros Book Values

85,000
190,000
450,000
160,000

Goodwill
Total assets
Liabilities
Common stock
Additional paid-in capital
Retained earnings
Total liabilities and equities

2,560,000
(500,000)
(400,000)
(475,000)
(1,185,000)
(2,560,000)

885,000
(180,000)
(200,000)
(70,000)
(435,000)
(885,000)

In addition, Pacifica assessed a research and development project under way at Seguros to have a fair
Pacifica paid legal fees of $ 15,000 in connection with the acquisition and $ 9,000 in stock issue costs.

Using the acquisition method, prepare the following:

a. Pacificas entries to account for the consideration transferred to the former owners of Seguros, the d
b. A postacquisition column of accounts for Pacifica.
c. A worksheet to produce a consolidated balance sheet as of December 31, 2014.

mpany as of March 1.

$ 2 par value common stock ( fair value of $ 50 per share)

will cease to exist as a separate entity.
fees to complete the transaction.

o pays cash of $ 4,200,000 to acquire Westmont. No stock is issued.

oting stock of Seguros Company. Pacifica will maintain Seguros as a wholly owned
transferred to the owner of Seguros included 50,000 newly issued Pacifica
o pay an additional $ 130,000 cash if Seguros meets certain project completion
y that Seguros will be successful in meeting these goals and uses a 4 percent

ere available:
Seguros Fair Values

85,000
180,000
600,000
200,000

Investment
BV of acquired net assets
Excess payment
(10,000)
150,000
40,000
100,000

1,062,500
705,000
357,500

280,000

77,500
(180,000)

way at Seguros to have a fair value of $ 100,000. Although not yet recorded on its books,
d $ 9,000 in stock issue costs.

ormer owners of Seguros, the direct combination costs, and the stock issue and registration costs. ( Use a 0.961
31, 2014.

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

Revenues
Expenses
Net Income
Retained earnings, 1/1/14
Net income
Dividends declared
Retained earnings, 12/31/14
Cash
Receivables and inventory
Property, plant, and equipment
Investment in Seguros

Pacifica* Seguros Book Values

(1,200,000)
890,000
(310,000)
(950,000)
(310,000)
90,000
(1,170,000)
86,000
85,000
750,000
190,000
1,400,000
450,000
1,062,500

In-process R&D
Goodwill
Trademarks
Total assets
Liabilities
Contingent performance liability
Common stock
Additional paid-in capital
Retained earnings
Total liabilities and equities

300,000
3,598,500
(500,000)
(62,500)
(650,000)
(1,216,000)
(1,170,000)
(3,598,500)

* It is a post-acquisition column for Pacifica

160,000
885,000
(180,000)
(200,000)
(70,000)
(435,000)
(885,000)

Debit

Credit

Consolidation

10,000
150,000
705,000
357,500
100,000
77,500
40,000

200,000
70,000
435,000

171,000
930,000
2,000,000
0
100,000
77,500
500,000
3,778,500
(680,000)
(62,500)
(650,000)
(1,216,000)
(1,170,000)
(3,778,500)