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

	Carrying Amount		Fair Value
Receivables	$	229,100	$	229,100
Inventory		94,400		94,400
Copyrights		165,500		579,500
Patented technology		857,000		694,000
Total assets	$	1,346,000	$	1,597,000
Current liabilities	$	236,000	$	236,000
Long-term liabilities		717,000		702,100
Common stock		100,000
Retained earnings		293,000
Total liabilities and equities	$	1,346,000

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 $137,500 to an investment banking firm.

The following information was also available:

	Zambrano further agreed to pay an extra $87,200 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 $43,600.
	Soriano has a research and development project in process with an appraised value of $213,000. 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 (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

a.

$806,500.

Record the acquisition of Soriano Co.

Record the expenses related to the combination.

Transaction

General Journal

Debit

Credit

1	Receivables	229,100
	Inventory	94,400
	Copyrights	579,500
	Patented technology	694,000
	Research and development asset
	Current liabilities
	Long-term liabilities
	Cash		806,500
	Contingent performance liability
	Gain on bargain purchase

b.

$916,900.

Record the acquisition of Soriano Co.

Record the expenses related to the combination.

Transaction

General Journal

Debit

Credit

1	Receivables	229,100
	Inventory	94,400
	Copyrights	579,500
	Patented technology	694,000
	Research and development asset
	Goodwill
	Current liabilities
	Long-term liabilities
	Cash		916,900
	Contingent performance liability

Record the acquisition of Soriano Co.

Record the expenses related to the combination.

Transaction

General Journal

Debit

Credit

2	Professional services expense
	Cash

Record the acquisition of Soriano Co.

Record the expenses related to the combination.

Transaction

General Journal

Debit

Credit

2	Professional services expense
	Cash