On December 31 2012 Pacifica Inc acquired 100 percent of

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On December 31, 2012, 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, 2013. 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: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 $9,000 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 December 31, 2012.View Solution:
On December 31 2012 Pacifica Inc acquired 100 percent of

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