(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. (Use a 0.961538
present value factor where applicable.)
(b)Prepare a post-acquisition column of accounts for Pacifica
(c)Prepare a worksheet to produce a consolidated balance sheet as of December 31, 2014

Business Combination:
Business combination relates to having an eliminating entry on the acquisition investment's
accounting. This is to allocate the amounts that should be recorded in the merged company's
book and should not affect the book of the other organization.

Answer and Explanation:

(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.
Consideration transferred

Shares at fair value ( 50,000 * 20 ) 1,000,000.00

Contigent consideration ( 130,000*50% * .
62,733.97
965138)
Total 1,062,734

Account Title Debit Credit

1,062,733.9
Invesrment in Seguros Company
7
Common Stock ( 50000*5) 250,000.00
Additional paid in capital ( 1M-250k) 750,000.00
Esrimated liability for contigent
62,733.97
consideration

Account Title Debit Credit

Additional paid in capital 9,000.00
Cash 9,000.00

Account Title Debit Credit

Acquisition related expenses 15,000.00
Cash 15,000.00
(b)Prepare a post-acquisition column of accounts for Pacifica

- Pacifica
Revenues -1,200,000.00
Expenses 890,000.00
Net Income -310,000.00
Retained earnings, 1/1/14 -950,000.00
Net Income -310,000.00
Dividends Declared 90,000.00
Retained earnings 12/31/14 -1,170,000.00
Cash 86,000.00
Receivables and Inventory 750,000.00
Property, plant and equipment 1,400,000.00
Invesrment in Seguros Company 1,062,734
Trademarks 300,000.00
Total Assets 3,598,734
Liabilities -500,000.00
Esrimated liability for contigent
-62,733.97
consideration
Common Stock -650,000.00
Additional paid in capital -1,216,000.00
Retained earnings -1,170,000.00
Total liabilities and equities -3,598,734

(c)Prepare a worksheet to produce a consolidated balance sheet as of December 31, 2014

- Pacifica Seguros DR CR CR
Revenues - - - - -
 1,200,000.00 1,200,000.00
Expenses 890,000.00 - - - 890,000.00
Net Income -310,000.00 - - - -310,000.00
Retained earnings, 1/1/14 -950,000.00 - - - -950,000.00
Net Income -310,000.00 - - - -310,000.00
Dividends Declared 90,000.00 - - - 90,000.00
- -
Retained earnings 12/31/14 - - -
1,170,000.00 1,170,000.00
Cash 86,000.00 85,000.00 - - 171,000.00
Receivables and Inventory 750,000.00 190,000.00 - - 940,000.00
Property, plant and
1,400,000.00 450,000.00 - - 1,850,000.00
equipment
Research and Development - - 100,000.00 - 100,000.00
Invesrment in Seguros 1,062,73
1,062,734 - - -
Company 4
Trademarks 300,000.00 160,000.00 - - 460,000.00
Goodwill - - 257,733.97 - 257,733.97
Total Assets 3,598,733.97 885,000.00 - - 3,778,733.97
-
Liabilities -500,000.00 - - -680,000.00
180,000.00
Estimated liability for
-62,734 - - - -62,733.97
contigent consideration
-
Common Stock -650,000.00 200,000.00 - -650,000.00
200,000.00
- -
Additional paid in capital -70,000.00 70,000.00 -
1,216,000.00 1,216,000.00
- - -
Retained earnings 435,000.00 -
1,170,000.00 435,000.00 1,170,000.00
- - -
Total liabilities and equities - -
3,598,733.97 885,000.00 3,778,733.97

Consideration transferred 1,062,733.97

Less: Book value 705,000.00
Excess 357,734
Research and
100,000.00
Development
Goodwill 257,733.97

24. The consideration transferred amounted to: d. P1,062

Shares at fair value ( 50,000 * 20 ) 1,000,000.00

Contingent consideration ( 130,000*50% * .
62,733.97
965138)
Total 1,062,734

25. The additional paid-in capital after combination amounted to:

26. The expenses for 20x4 amounted to:
27. The net income for 20x4 amounted to:
28. The retained earnings on December 31, 20x4 amounted to:
29. Amount of goodwill:
30. Amount of goodwill and contingent performance obligation:
31. Value of the earn out at the date of acquisition: