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

values:

Carrying Amount Fair Value

Receivables ........................ $ 90,000 $ 90,000

Inventory........................... 75,000 75,000

Copyrights ......................... 125,000 480,000

Patented technology ................ 825,000 700,000

Total assets ........................ $ 1,115,000 $ 1,345,000

Current liabilities .................... $ 160,000 $ 160,000

Long-term liabilities.................. 645,000 635,000

Common stock ..................... 100,000

Retained earnings................... 210,000

Total liabilities and equities........... $ 1,115,000

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 $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 projects assets have no alternative future use.

Prepare Zambranos journal entries to record the Soriano acquisition assuming its initial cash payment to the former owners was

a. $700,000.

b. $800,000.