On May 1, Soriano Company reported the following account balances along with their estimated fair values: Items Receivables Inventory Copyrights Carrying Amount $ 47,300 84,200 150,500 851,000 Fair Value $ 47,300 84,200 554,500 629,000 Patented technology Total assets Current liabilities Common stock Long-term liabilities Retained earnings Total liabilities and equities $ 1,133,000 $ 168,000 649,000 100,000 216,000 $ 1,133,000 $ 1,315,000 $ 168,000 636,300 0 0 0 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 $143,500 to an investment banking firm. The following information was also available: • Zambrano further agreed to pay an extra $72,600 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 $36,300. • Soriano has a research and development project in process with an appraised value of $215,000. However, the project has not yet reached technological feasibility, and the project's assets have no alternative future use. Required: a. and b. Prepare Zambrano's journal entries to record the Soriano acquisition assuming its initial cash payment to the former owners was (a) $665,800 and (b) $785,200.
On May 1, Soriano Company reported the following account balances along with their estimated fair values: Items Receivables Inventory Copyrights Carrying Amount $ 47,300 84,200 150,500 851,000 Fair Value $ 47,300 84,200 554,500 629,000 Patented technology Total assets Current liabilities Common stock Long-term liabilities Retained earnings Total liabilities and equities $ 1,133,000 $ 168,000 649,000 100,000 216,000 $ 1,133,000 $ 1,315,000 $ 168,000 636,300 0 0 0 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 $143,500 to an investment banking firm. The following information was also available: • Zambrano further agreed to pay an extra $72,600 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 $36,300. • Soriano has a research and development project in process with an appraised value of $215,000. However, the project has not yet reached technological feasibility, and the project's assets have no alternative future use. Required: a. and b. Prepare Zambrano's journal entries to record the Soriano acquisition assuming its initial cash payment to the former owners was (a) $665,800 and (b) $785,200.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Denger
Transcribed Image Text:On May 1, Soriano Company reported the following account balances along with their estimated fair values:
Items
Receivables
Inventory
Copyrights
Carrying
Amount
$ 47,300
84,200
150,500
851,000
Fair Value
$ 47,300
84,200
554,500
629,000
Patented technology
Total assets
Current liabilities
Common stock
Long-term liabilities
Retained earnings
Total liabilities and equities
$ 1,133,000
$ 168,000
649,000
100,000
216,000
$ 1,133,000
$ 1,315,000
$ 168,000
636,300
0
0
0
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 $143,500 to an investment banking firm.
The following information was also available:
• Zambrano further agreed to pay an extra $72,600 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
$36,300.
• Soriano has a research and development project in process with an appraised value of $215,000. However, the project has not yet
reached technological feasibility, and the project's assets have no alternative future use.
Required:
a. and b. Prepare Zambrano's journal entries to record the Soriano acquisition assuming its initial cash payment to the former owners
was (a) $665,800 and (b) $785,200.
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