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 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.
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 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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Transcribed Image Text: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
50,000 shares, and the fair value of each share at the acquisition date is $2.20. After the
transaction, Edison Ltd continued in business otherwise unaffected.
Fair
Carrying
amount ($)
Cost ($)
value
($)
Accounts
10 000
7 000 8 000
receivable
Machinery
40 000
30 000 35 000
Accounts
3 000
3 000 3 000
payable
Additional information:
Edison Ltd had not recorded an internally generated trademark. Thomas Ltd estimated the
fair value of this trademark to be $60,000.
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
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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