Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On May 1, Soriano Co. reported the following account balances along with their estimated fair values: Carrying Amount Fair Value Receivables $ 83,900 $ 83,900

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

Carrying Amount Fair Value
Receivables $

83,900

$

83,900

Inventory

74,600

74,600

Copyrights

150,500

586,500

Patented technology

890,000

691,000

Total assets $

1,199,000

$

1,436,000

Current liabilities $

178,000

$

178,000

Long-term liabilities

683,000

669,700

Common stock

100,000

Retained earnings

238,000

Total liabilities and equities $

1,199,000

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 $120,000 to an investment banking firm.

The following information was also available:

  • Zambrano further agreed to pay an extra $81,200 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 $40,600.
  • Soriano has a research and development project in process with an appraised value of $245,000. However, the project has not yet reached technological feasibility and the projects assets have no alternative future use.

a&b. Prepare Zambranos journal entries to record the Soriano acquisition assuming its initial cash payment to the former owners was (a) $767,900 & (b) $888,900. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Management and Cost Accounting

Authors: Alnoor Bhimani, Charles T. Horngren, Srikant M. Datar, George Foster

4th edition

1405888202, 978-0273711490, 273711490, 978-1405888202

More Books

Students also viewed these Accounting questions