Question 1: Business combinations (25 marks) Thor Lid, a supplier of motor vehicle spare parts, agreed to acquire the business of a rival company, Loki Lid, taking over all assets and liabilities as at 1 May 2021. The consideration was payable by the issue of 10 000 shares in Thor Led with a fair value of $1 each and the balance by transfer of the share portfolio held by Thor Lid. The share portfolio had a fair value as at 1 May 2021 of $75 000. The trial balances of the two companies as at 1 May 2021 were as follows. Thor Lid Loki Ltd Dr C Dr C Share capital 50 000 49 000 Retained carnings 6 000 2 000 Accounts payable 1500 5 000 Mortgage loan 100 500 Cash 25 000 6 000 Equipment (net) 50 000 45 000 Inventory 8 000 4 000 Share portfolio 70 000 Goodwill 5 000 1 000 158 000 158 000 56 000 56 000 All the identifiable net assets of Loki Lid were recorded by Loki Lid at fair value except for the equipment, which were considered to be worth $30 Of10 (assume no tax effect). The plant had an expected remaining life of 5 years. The business combination was completed and Loki Lid went into liquidation. Thor Lid incurred incidental costs of $650 in relation to the acquisition. Costs of issuing shares in Thor Led were $300 with an additional $450 paid to a share brokerage firm. Required 1. Calculate the goodwill /gain on bargain purchase, show your workings. (3 marks) 2. Prepare the journal entries in the records of Thor Led to account for the acquisition of the assets and liabilities of Loki Ltd. (14 marks) 3. Show in good format the statement of financial position of Thor Led after completion of the business combination. (8 marks)