On December 31, Pacifica, Inc., acquired 100 percent of the voting stock of Seguros Company. Pacifica will maintain Seguros as awholly owned subsidiary with its own legal and accounting identity. The consideration transferred to the owner of Seguros included56,500 newly issued Pacifica common shares ($20 market value, $5 par value) and an agreement to pay an additional $130,000 cashif Seguros meets certain project completion goals by December 31 of the following year. Pacifica estimates a 50 percent probabilitythat Seguros will be successful in meeting these goals and uses a 4 percent discount rate to represent the time value of money.Immediately prior to the acquisition, the following data for both firms were available:RevenuesExpensesNet incomeRetained earnings, 1/1Net incomeDividends declaredRetained earnings, 12/31CashReceivables and inventoryProperty, plant, and equipmentTrademarksTotal assetsLiabilitiesCommon stockAdditional paid-in capitalRetained earningsTotal liabilities and equitiesSegurosBookValues$SegurosFairValuesPacifica$(2,110,000)1,477,000$ (633,000)$(1,026,000)(633,000)171,000$(1,488,000)93,000162,000 $ 154,000254,0002,190,000353,000487,000248,000$ 2,959,000 $ 982,000$(596,000) $ (258,000) $ (258,000)(400,000) (200,000)(475,000)(70,000)(1,488,000) (454,000)$(2,959,000) $ (982,000)$ 154,00073,500662,500293,000In addition, Pacifica assessed a research and development project under way at Seguros to have a fair value of $157,000. Although notyet recorded on its books, Pacifica paid legal fees of $24,600 in connection with the acquisition and $11,700 in stock issue costs.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.b.&c. Present a worksheet showing the postacquisition column of accounts for Pacifica and the consolidated balance sheet as of theacquisition date.

Journal entries are those entries that are reported into the books of accounts of the company and…

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. b.&c. Present a worksheet showing the postacquisition column of accounts for Pacifica and the consolidated balance sheet as of the acquisition date.

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. b.&c. Present a worksheet showing the postacquisition column of accounts for Pacifica and the consolidated balance sheet as of the acquisition date.

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization

Section: Chapter Questions

Problem 62P

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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 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…
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 55,370 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: Pacifica Seguros Book Values Seguros Fair Values Revenues $ (1,320,000 ) Expenses 924,000 Net income $ (396,000 ) Retained earnings, 1/1 $ (1,035,000 ) Net income (396,000…
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