Thomas Ltd purchased from Edison Ltd the following parcel of assets and liabilities representing a business....
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Thomas Ltd purchased from Edison Ltd the following parcel of assets and liabilities representing a business. In exchange for these assets and liabilities, Thomas Ltd issued 30,000 shares, and the fair value of each share at the acquisition date is $2.20. After the transaction, Edison Ltd continued in business otherwise unaffected. Cost ($) Carrying amount ($) Fair value ($) Accounts receivable 19 000 18 000 16 000 Machinery 100 000 75 000 80 000 Accounts payable 4 000 4 000 4 000 Additional information: Edison Ltd had not recorded a legal claim as a liability due to the uncertainty of an outcome. Thomas Ltd estimated the fair value of this contingent liability to be $20,000. Required: a) Prepare all necessary journal entries to record the above acquisition. (Using the provided journal entry template to enter your answer; workings/calculations or narrations are NOT required.) b) If the parcel of assets and liabilities does not represent a business, list any accounts that would be recorded in a) but should not be recognized anymore in Thomas Ltd's record. Explain the reason. Thomas Ltd purchased from Edison Ltd the following parcel of assets and liabilities representing a business. In exchange for these assets and liabilities, Thomas Ltd issued 30,000 shares, and the fair value of each share at the acquisition date is $2.20. After the transaction, Edison Ltd continued in business otherwise unaffected. Cost ($) Carrying amount ($) Fair value ($) Accounts receivable 19 000 18 000 16 000 Machinery 100 000 75 000 80 000 Accounts payable 4 000 4 000 4 000 Additional information: Edison Ltd had not recorded a legal claim as a liability due to the uncertainty of an outcome. Thomas Ltd estimated the fair value of this contingent liability to be $20,000. Required: a) Prepare all necessary journal entries to record the above acquisition. (Using the provided journal entry template to enter your answer; workings/calculations or narrations are NOT required.) b) If the parcel of assets and liabilities does not represent a business, list any accounts that would be recorded in a) but should not be recognized anymore in Thomas Ltd's record. Explain the reason.
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Date Particulars Dr Cr xx Accounts Receivables 16000 Machinery 80000 Accounts Pay... View the full answer
Related Book For
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker
Posted Date:
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