Bagley Incorporateds statement of financial position as at July 31, Year 4, is as follows:

BAGLEY INCORPORATED STATEMENT OF FINANCIAL POSITION At July 31, Year 4
	Carrying Amount			Fair Value
Plant and equipment (net)	$	910,000		$	1,053,000
Patents		-			78,000
Current assets		455,000			507,000
	$	1,365,000
Ordinary shares	$	182,000
Retained earnings		520,000
Long-term debt		390,000			416,000
Current liabilities		273,000			273,000
	$	1,365,000

On August 1, Year 4, the directors of Bagley considered a takeover offer from Davis Inc., whereby the corporation would sell all of its assets and liabilities. Daviss costs of investigation and drawing up the merger agreement would amount to $19,500.

Required:

(a) Assume that Davis made a $1,040,000 cash payment to Bagley for its net assets. Prepare the journal entries in the accounting records of Davis to record the business combination. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Transcation 1: Record the acquisition of net assets of Bagley Incorporated in Davis Inc's books.

Transcation 2 : Record the $19,500 cash paid for professional fees expense.

(b) Assume that Davis issued 130,000 ordinary shares, with a market value of $8.00 per share, to Bagley for its net assets. Legal fees associated with issuing these shares amounted to $6,500 and were paid in cash. Davis had 150,000 shares outstanding prior to the takeover.

(i) Prepare the journal entries in the records of Davis to record the business combination. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Transcation 1 : Record the acquisition of net assets of Bagley Incorporated in Davis Inc's books.

Transcation 2 : Record the payment of $6,500 legal fees for the issue of 130,000 equity shares at a market value of $8.00 per share.

Transcation 3 : Record the $21,000 cash paid for professional fees expense.

(ii) Prepare the statement of financial position of Bagley immediately after the sale.

Bagley Incorporated
Statement of Financial Position
August 1, Year 4
Assets
Liabilities and Equity