On December 31, Pacifica, Inc., acquired 100 percent of thevoting stock of Seguros Company. Pacifica will maintain Seguros asa wholly owned subsidiary with its own legal and accountingidentity. The consideration transferred to the owner of Segurosincluded 56,500 newly issued Pacifica common shares ($20 marketvalue, $5 par value) and an agreement to pay an additional $130,000cash if Seguros meets certain project completion goals by December31 of the following year. Pacifica estimates a 50 percentprobability that Seguros will be successful in meeting these goalsand uses a 4 percent discount rate to represent the time value ofmoney.

Immediately prior to the acquisition, the following data forboth firms were available:

	Pacifica				Seguros Book Values				Seguros Fair Values
Revenues	$	(2,110,000	)
Expenses		1,477,000
Net income	$	(633,000	)
Retainedearnings, 1/1	$	(1,026,000	)
Net income		(633,000	)
Dividendsdeclared		171,000
Retainedearnings, 12/31	$	(1,488,000	)
Cash	$	162,000			$	154,000			$	154,000
Receivables andinventory		254,000				93,000				73,500
Property, plant,and equipment		2,190,000				487,000				662,500
Trademarks		353,000				248,000				293,000
Totalassets	$	2,959,000			$	982,000
Liabilities	$	(596,000	)		$	(258,000	)		$	(258,000	)
Commonstock		(400,000	)			(200,000	)
Additionalpaid-in capital		(475,000	)			(70,000	)
Retainedearnings		(1,488,000	)			(454,000	)
Totalliabilities and equities	$	(2,959,000	)		$	(982,000	)

In addition, Pacifica assessed a research and developmentproject under way at Seguros to have a fair value of $157,000.Although not yet recorded on its books, Pacifica paid legal fees of$24,600 in connection with the acquisition and $11,700 in stockissue costs.

a. Prepare Pacifica’s entries to account forthe consideration transferred to the former owners of Seguros, thedirect combination costs, and the stock issue and registrationcosts.

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