chapter 2 question35
P02-35 ACC 370 Worksheet for Chapter 2 Problem 35 Do not type (hardcode) any numbers onto this spreadsheet unless absolutely necessary. Use links and formulas wherever possible. Enter amounts/formulas in blue-shaded cells only. Consideration for Seguros stock consists of the following:Seguros as IPR&D costs of100,000 Pacifica stock50,000sharesPacifica paid legal fees of15,000 $ 20Fair market valuePacifica paid stock issuance costs of9,000 $ 5Par value Contingent consideration (CC)$ 130,000 50%Probability of paymentA/R & Inventory 4%Discount ratePP&E $ 62,500Present value of CCTrademarks R&D costs Purchase price (consideration)- 0 Book value of net assetsGoodwill- 0 Excess purchase price- 0=- 0 Journal entries on Pacifica's books to record acquisition of Seguros: Note: these three entries are NOT consolidation entries. They are posted to the books of Pacifica and are reflected in the Pacifica column below. Your instructor has already set up formulas in the Pacifica column below to capture these entries. 1Investment in Seguros Common stock Additional paid-in capital Contingent performance obligation To record acquisition of 100% of Seguros stock 2Professional services expense Cash- 0 To record payment of legal fees pursuant to acquisition of Seguros 3Additional paid-in capital Cash- 0 To record stock issuance costs associated with issuing stock to Seguros Consolidation/elimination journal entries: Note: these two entries should be posted to the Adjustments columns below as we did in class last week. Key them with an 'S' or an 'A'. SCommon stock Additional paid-in capital Retained earnings Investment in Seguros- 0 To eliminate common stock and investment account for Seguros AProperty, plant & equipment (PP&E)- 0 Research and development costs- 0 Goodwill- 0 Trademarks- 0 Receivables and inventory- 0 Investment in Seguros- 0 To allocate excess purchase price from Investment account to the related assets Adjustments (enter all as positive) CONSOLIDATION WORKSHEETLink from journal entries above PacificaSegurosDRKeyCRKeyConsolidated INCOME STATEMENT: Revenues(1,200,000)- 0(1,200,000) Expenses875,000- 0875,000 Net income(325,000)- 0(325,000) STATEMENT OF RETAINED EARNINGS: Retained earnings, 1/1/2014(950,000)- 0(950,000) Net income(325,000)- 0(325,000) (Dividends paid)90,000- 090,000 Retained earnings, 12/31/2014(1,185,000)- 0(1,185,000) BALANCE SHEET: Cash110,00085,000195,000 Receivables and inventory750,000190,000A940,000 Property, plant & equipment (PP&E)1,400,000450,000A1,850,000 Investment in Seguros- 0- 0S A- 0 Research and development costs- 0- 0A- 0 Goodwill- 0- 0A- 0 Trademarks300,000160,000A460,000 Total assets2,560,000885,0003,445,000 Contingent performance obligation- 0- 0- 0 Other liabilities(500,000)(180,000)(680,000) Common stock(400,000)(200,000)S(600,000) Additional paid-in capital(475,000)(70,000)S(545,000) Retained earnings(1,185,000)(435,000)S(1,620,000) Total liabilities & equity(2,560,000)(885,000)- 0- 0(3,445,000) - 0- 0- 0- 0 &FPage &P of &N&A