20.

(Journal entries to record a mergeracquired company dissolved)

Inventory
Land
Buildings
Customer Relationships
Goodwill
Accounts Payable
Common Stock
Additional Paid-In Capital
Cash

600,000
990,000
2,000,000
800,000
690,000
80,000
40,000
960,000
4,000,000

Professional Services Expense

Cash

42,000

Additional Paid-In Capital

Cash

25,000

42,000
25,000

21. (Journal entries to record a bargain purchaseacquired company dissolved)

Inventory
Land
Buildings
Customer Relationships
Accounts Payable
Cash
Gain on Bargain Purchase
Professional Services Expense
Cash

600,000
990,000
2,000,000
800,000
80,000
4,200,000
110,000
42,000
42,000

32. (Prepare a consolidated balance sheet using the acquisition method).

a. Entry to record the acquisition on Pacificas 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
The contingent consideration is computed as:
$130,000 payment 50% probability 0.961538 present value factor
Combination expenses
Cash
APIC
Cash

15,000
15,000
9,000
9,000

b. and c.

Revenues
Expenses
Net income

Pacifica
(1,200,000)
890,000
(310,000)

Retained earnings, 1/1

Net income
Dividends declared
Retained earnings, 12/31

(950,000)
(310,000)
90,000
(1,170,000)

Cash
Receivables and inventory
Property, plant and equip.
Investment in Seguros
R&D asset
Goodwill
Trademarks
Total assets
Liabilities
Contingent obligation
Common stock
Additional paid-in capital
Retained earnings
Total liabilities and equities

86,000
750,000
1,400,000
1,062,500

Seguros

85,000
190,000
450,000

Consolidation Entries

(A) 10,000
(A)150,000
(S) 705,000
(A) 357,500

300,000
3,598,500

160,000
885,000

(500,000)
(62,500)
(650,000)
(1,216,000)
(1,170,000)
(3,598,500)

(180,000)
(200,000)
(70,000)
(435,000)
(885,000)

(A)100,000
(A) 77,500
(A) 40,000

(S) 200,000
(S) 70,000
(S) 435,000

Consolidated
Balance
Sheet

171,000
930,000
2,000,000
0
100,000
77,500
500,000
3,778,500
(680,000)
(62,500)
(650,000)
(1,216,000)
(1,170,000)
(3,778,500)