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.
Please calculate Goodwill.