On May 1, Soriano Co. reported the following account balances along with their estimated fair values: Carrying Amount Fair Value Receivables $ 188,400 $ 188,400 Inventory 76,600 76,600 Copyrights 146,000 522,000 Patented technology 864,000 646,000 Total assets $ 1,275,000 $ 1,433,000 Current liabilities $ 182,000 $ 182,000 Long-term liabilities 700,000 682,000 Common stock 100,000 Retained earnings 293,000 Total liabilities and equities $ 1,275,000 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 $123,000 to an investment banking firm. The following information was also available: Zambrano further agreed to pay an extra $74,000 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 $37,000. Soriano has a research and development project in process with an appraised value of $230,000. 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) $746,500 & (b) $853,200. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 1. Record the acquisition of Soriano Co. Assume its initial cash payment to the former owners was $746,500. 2.Record the expenses related to the combination. Assume its initial cash payment to the former owners was $746,500. 3.Record the acquisition of Soriano Co. Assume its initial cash payment to the former owners was $853,200. 4.Record the expenses related to the combination. Assume its initial cash payment to the former owners was $853,200.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
On May 1, Soriano Co. reported the following account balances along with their estimated fair values:
| Carrying Amount | Fair Value | |||||
| Receivables | $ |
188,400 |
$ |
188,400 |
||
| Inventory |
76,600 |
76,600 |
||||
| Copyrights |
146,000 |
522,000 |
||||
| Patented technology |
864,000 |
646,000 |
||||
| Total assets | $ |
1,275,000 |
$ |
1,433,000 |
||
| Current liabilities | $ |
182,000 |
$ |
182,000 |
||
| Long-term liabilities |
700,000 |
682,000 |
||||
| Common stock |
100,000 |
|||||
|
293,000 |
||||||
| Total liabilities and equities | $ |
1,275,000 |
||||
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 $123,000 to an investment banking firm.
The following information was also available:
- Zambrano further agreed to pay an extra $74,000 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 $37,000.
- Soriano has a research and development project in process with an appraised value of $230,000. 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) $746,500 & (b) $853,200. (If no entry is required for a transaction/event, select "No
1. Record the acquisition of Soriano Co. Assume its initial cash payment to the former owners was $746,500.
- 2.Record the expenses related to the combination. Assume its initial cash payment to the former owners was $746,500.
- 3.Record the acquisition of Soriano Co. Assume its initial cash payment to the former owners was $853,200.
- 4.Record the expenses related to the combination. Assume its initial cash payment to the former owners was $853,200.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 4 images
