Question

On May 1. Soriano Co. reported the following account balances along with their estimated fair values: Receivables Inventory Copyrights Patented technology Total assets Current liabilities Long-term liabilities Common stock Retained earnings Total liabilities and equities Carrying Amount Fair Value S 92,500 $ 92,500 84,000 172,500 537,500 906,000 739,000 $ 1,255,000 $1,453,000 s 205,000 3 205,000 713,000 694,000 100,000 237,000 $ 1,255,000 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 $135.000 to an investment banking firm. The following information was also available: • Zambrano further agreed to pay an extra $86.400 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 $43,200. • Soriano has a research and development project in process with an appraised value of $237.000. However, the project has not yet reached technological feasibility and the project's assets have no alternative future use. a&b. Prepare Zambrano's journal entries to record the Soriano acquisition assuming its initial cash payment to the former owners was (a) $725,800 & (6) $840,000. (If no entry Is required for a transaction/event, select "No journal entry required" In the first account fleld.) View transaction list Journal entry worksheet < 1 2 3 4 > Record the acquisition of Soriano Co. Assume its initial cash payment to the former owners was $725,800. Note: Enter debits before credits. Transaction General Journal Debit Credit 1 < Prev 4 of 5 !!! Next >

Answer 1

Preparation of journal Entries A Preparation of Zambrano's Journal Entries to record acquisition: Transaction General Journal Debit Credit 1 Receivables $ 92,500 Inventory $ 84,000 Copyrights $ 5,37,500 Patented technology $ 7,39,000 Goodwill $ 2,15,000 Current liability $ 2,05,000 Long-term liabilities $ 6,94,000 Cash $ 7,25,800 Contigent consideration $ 43,200 (To record Business aquired) nuu working notes if cash payment is $ 725800 Calculation of Net Assets: Particulars Amount Receivables $ 92,500 Inventory $ 84,000 Copyrights $ 5,37,500 Patented technology $ 7,39,000 Total assets $14,53,000 Current liabilities $ 2,05,000 Long-term liabilities $ 6,94,000 Net assets $ 5,54,000 $ 1,35,000 2 Professsional fees -expense Cash (To record Paid to bank) $ 1,35,000 Calculation of Goodwill Particulars Net identifiable assets Consideration paid in cash Add: contingent consideration Goodwill Amount $ 5,54,000 $ 8,40,000 $ 43,200 $ 3,29,200 Calculation of Goodwill Particulars Cash paid as consideration Add: contigent consideration fair value Total consideration Net assets Goodwill Amount $7,25,800 $ 43,200 $7,69,000 $5,54,000 $ 2,15,000 B Preparation of Zambrano's Journal Entries to record acquisition: Transaction General Journal Debit Credit 1 Receivables $ 92,500 Inventory 84,000 Copyrights 5,37,500 Patented technology 7,39,000 Goodwill 3,29,200 Current liability $ 2,05,000 Long-term liabilities $ 6,94,000 Cash $ 8,40,000 Contigent consideration $ 43,200 (To record Business aquired) ololololo $ 1,35,000 2 Professsional fees -expense Cash (To record Paid to bank) $ 1,35,000 * Kindly Comment down for any clarifications/ queries and please upvote.