80.2K

Verified Solution

Link Copied!

On May $1,$ Soriano Company 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 $$101,500$ to an investment banking firm.

The following information was also available: $1$Record the acquisition of Soriano Company. Assume its initial cash payment to the former owners was $$743,800.$

$2$Record the expenses related to the combination. Assume its initial cash payment to the former owners was $$743,800.$

$3$Record the acquisition of Soriano Company. Assume its initial cash payment to the former owners was $$862,800.$

$4$Record the expenses related to the combination. Assume its initial cash payment to the former owners was $$862,800.$

Zambrano further agreed to pay an extra $$81,400$ 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

$$40,700.$

Soriano has a research and development project in process with an appraised value of $$210,500.$ 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$)$ $$743,800$ and $($b$)$ $$862,800.$

$1$Record the acquisition of Soriano Company. Assume its initial cash payment to the former owners was $$743,800.$

$2$Record the expenses related to the combination. Assume its initial cash payment to the former owners was $$743,800.$

$3$Record the acquisition of Soriano Company. Assume its initial cash payment to the former owners was $$862,800.$

$4$Record the expenses related to the combination. Assume its initial cash payment to the former owners was $$862,800.$

Answer & Explanation Solved by verified expert

See Answer