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1) On December 31, 2010, Pacifica, Inc., acquired 100 percent of the voting stock of Seguros Company. Pacifica will maintain Seguros as a wholly...


The following question was answered by a tutor previously on Course Hero, I am attaching the solution that was provided. I need to know specifically how goodwill was calculated (77,500). I appreciate your help!
On December 31, 2010, 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 identify. the consideration transferred to the owner of Seguros included 50000 newly issued Pacifica commom shares ($20 market value, $5 par value) and an agreement to pay an additional $130000 cash if Seguros meets certain project completion goals by December 31, 2011. 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 for both firms were available:
Pacifica Seguros Seguros
Book value Fair value
Revenues..............(1200000)
Expenses.............. 875000
net income..............(325000)
Retained earnings 1/1/10..(950000)
Net income................(325000)
Dividends paid............. 90000
Retained earnings 12/31//10 (1185000)
Cash......................$110000 $85000 $85000
Receivables and inventory...750000 190000 180000
Property, plant and equipment 1400000 450000 600000
Trademarks.................... 300000 160000 200000
Total assets...................2560000 885000
Liabilities..................(500000) (180000) (180000)
Common stock..................(400000) (200000)
Additional paid in capital....(475000) (70000)
Retained earnings............. (1185000)(435000)
Total liabilities and equities (2560000) (885000)

In addition, Pacifica assessed a research and development project under way at Seguros to have a fair value of $100000. Although not yet recorded on its books, Pacifica paid legal fees of $15000 in connection with the acquisition and $9000 in stock issue costs.
Using the acquisition method, 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, 2010.
1) On December 31, 2010, 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 identify. the consideration transferred to the owner of Seguros included 50000 newly issued Pacifica commom shares ($20 market value, $5 par value) and an agreement to pay an additional $130000 cash if Seguros meets certain project completion goals by December 31, 2011. 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 for both firms were available: Pacifica Seguros Seguros Book value Fair value Revenues. ............. (1200000) Expenses. ............. 875000 net income. ............. (325000) Retained earnings 1/1/10. .(950000) Net income. ............... (325000) Dividends paid. ............ 90000 Retained earnings 12/31//10 (1185000) Cash. ..................... $110000 $85000 $85000 Receivables and inventory. ..750000 190000 180000 Property, plant and equipment 1400000 450000 600000 Trademarks. ................... 300000 160000 200000 Total assets. .................. 2560000 885000 Liabilities. ................. (500000) (180000) (180000) Common stock. ................. (400000) (200000) Additional paid in capital. ...(475000) (70000) Retained earnings. ............ (1185000)(435000) Total liabilities and equities (2560000) (885000) In addition, Pacifica assessed a research and development project under way at Seguros to have a fair value of $100000. Although not yet recorded on its books, Pacifica paid legal fees of $15000 in connection with the acquisition and $9000 in stock issue costs. Using the acquisition method, 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, 2010. Solution: a. Entry to record the acquisition on Pacifica’s records. Investment in Seguros --------1,062,500 Common Stock (50,000 × $5) -------------------------250,000 Additional Paid-In Capital (50,000 × $15) ----------750,000 Contingent performance obligation --------------------62,500 Contingent consideration = $130,000 payment × 50% probability × 0.961538 present value factor = 62,500 Combination expenses ---------15,000 Cash ------------------------------15,000 APIC ------------9,000 Cash -----------------9,000 b. and c. Pacifica Seguros Consolidation Entries Consolidation balance sheet Revenue (1,200,000 ) (1,200,000) Expenses 890,000 890,000 Net Income 310,000 310,000 Retained earnings 1/1 (950,000) (950,000) Net Income (310,000) (310,000) Dividends paid 90,000 90,000 Retained earnings 12/31 (1,170,000 ) (1,170,000) Cash 86,000 85,000 171,000 Receivables and Inventory 750,000 190,000 (A)10,000 930,000 Property, plant and equipment 1,400,000 450,000 (A)150,000 2,000,000 Investment in Seguros 1,062,500 (S) 705,000 (A) 357,500 0 Capitalized IPR&D (A) 100,000 Goodwill (A)77,500 Trademarks 300,000 160,000 (A)40,000 Total assets 3,598,500 885,000 3,778,500 Liabilities (500,000) (180,000 ) (680,000) Contingent obligation (62,500) (62,500) Common stock (650,000) (200,000) (S) 200,000 (650,000)
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Additional paid-in- capital (1,216,000 ) (70,000) (S) 70,000 (1,216,000) Retained earnings (1,700,000 ) (435,000) (S) 435,000 (1,700,000) Total liabilities and equity 3,598,500 885,000 3,778,500
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