Reference no: EM132982821

On 1 July 2020, Thomas Ltd acquired a parcel of assets and liabilities comprising a business directly from Edison Ltd. The assets and liabilities at 1 July 2020 were as follows:

                             Carrying amount ($)                     Fair value ($)
Inventory                         77 000                                 96 500
Equipment                       135 000                                   210 000
Accounts payable                  2 000                                       2 000

For this acquisition, Thomas Ltd issued 70,000 shares, the fair value of which at the acquisition date was $3.80 each.

Additional information:

Edison Ltd had not recorded an internally developed patent. Thomas Ltd estimated the fair value of this patent to be $18,000.

Required:

Problem 1: Prepare the journal entry in the records of Thomas Ltd to account for the above acquisition.