On May 1, Soriano Co. reported the following account balances along with their estimated fair values: Carrying Amount Fair Value Receivables $ 144,100 $ 144,100 Inventory 77,400 77,400 Copyrights 135,500 509,500 Patented technology 901,000 744,000 Total assets $ 1,258,000 $ 1,475,000 Current liabilities $ 235,000 $ 235,000 Long-term liabilities 686,000 671,300 Common stock 100,000 Retained earnings 237,000 Total liabilities and equities $ 1,258,000 On that day, Zambrano paid cash to acquire all of the assets and liabilities of Soriano, which will cease to exist as a separate entity. To facilitate the merger, Zambrano also paid $133,500 to an investment banking firm. The following information was also available: Zambrano further agreed to pay an extra $87,600 to the former owners of Soriano only if they meet certain revenue goals during the next two years. Zambrano estimated the present value of its probability adjusted expected payment for this contingency at $43,800. Soriano has a research and development project in process with an appraised value of $236,000. However, the project has not yet reached technological feasibility and the project’s assets have no alternative future use. a&b. Prepare Zambrano’s journal entries to record the Soriano acquisition assuming its initial cash payment to the former owners was (a) $745,000 & (b) $848,700.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter4: The Balance Sheet And The Statement Of Shareholders' Equity

Section: Chapter Questions

Problem 6RE: Oz Corporation has the following assets at year-end: Patents (net), 26,000; Land, 50,000; Buildings,...

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On May 1, Soriano Co. reported the following account balances along with their estimated fair values:

	Carrying Amount	Fair Value
Receivables	$	144,100	$	144,100
Inventory		77,400		77,400
Copyrights		135,500		509,500
Patented technology		901,000		744,000
Total assets	$	1,258,000	$	1,475,000
Current liabilities	$	235,000	$	235,000
Long-term liabilities		686,000		671,300
Common stock		100,000
Retained earnings		237,000
Total liabilities and equities	$	1,258,000

On that day, Zambrano paid cash to acquire all of the assets and liabilities of Soriano, which will cease to exist as a separate entity. To facilitate the merger, Zambrano also paid $133,500 to an investment banking firm.

The following information was also available:

Zambrano further agreed to pay an extra $87,600 to the former owners of Soriano only if they meet certain revenue goals during the next two years. Zambrano estimated the present value of its probability adjusted expected payment for this contingency at $43,800.
Soriano has a research and development project in process with an appraised value of $236,000. However, the project has not yet reached technological feasibility and the project’s assets have no alternative future use.

a&b. Prepare Zambrano’s journal entries to record the Soriano acquisition assuming its initial cash payment to the former owners was (a) $745,000 & (b) $848,700. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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