Chapter 2, Problem 38APA

Colour Ltd. enters into a business combination with Pink Inc. on January 1, Year 1. To complete the business combination, Colour Ltd. issued 65,000 of its common shares which is currently trading at $9.00 per share. Colour is considered to be the clear acquirer. Costs associated with the business combination are: Acquisition cost of $6,500; and Costs of issuing shares of $8,000 Statement of financial position for the two companies immediately before the business combination are below: Colour Ltd. Pink Inc. Book Value Fair Value Book Value Fair Value Cash 165,500 165,500 63,050 63,050 Accounts Receivable 156,800 155,000 98,550 80,500 Inventory 388,770 402,500 123,450 134,000 Equipment (net) 458,550 408,900 60,800 65,500 Buildings (net) 335,000 446,500 249,580 309,450 Land 412,500 585,000 -  Total 1,917,120 595,430 Current liabilities 185,560 185,560 41,160 41,160 Long-term debt 580,660 590,000 150,000 155,000 Common shares…

On May 1, Soriano Co. reported the following account balances along with their estimated fair values: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 $100,000 to an investment banking firm.The following information was also available:• Zambrano further agreed to pay an extra $70,000 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 $35,000.• Soriano has a research and development project in process with an appraised value of $200,000. However, the project has not yet reached technological feasibility and the project’s assets have no alternative future use.Prepare Zambrano’s journal entries to record the Soriano acquisition assuming its initial cash payment to the former owners wasa. $700,000.b.…

On January 3, 2022, Persoff Corporation acquired all of the outstanding voting stock of Sea Cliff, Incorporated, in exchange for $6,652,000 in cash. Persoff elected to exercise control over Sea Cliff as a wholly owned subsidiary with an independent accounting system. Both companies have December 31 fiscal year-ends. At the acquisition date, Sea Cliff's stockholders' equity was $2,522,000 including retained earnings of $1,722,000. Persoff pursued the acquisition, in part, to utilize Sea Cliff's technology and computer software. These items had fair values that differed from their values on Sea Cliff's books as follows: Asset Patented technology Computer software Book Value $ 150,000 Fair Value $ 2,390,000 Remaining Useful Life 7 years $ 66,000 $ 1,746,000 12 years Sea Cliff's remaining identifiable assets and liabilities had acquisition-date book values that closely approximated fair values. Since acquisition, no assets have been impaired. During the next three years, Sea Cliff reported…