Problem The statement of financial position of Bagley Incorporated as at July 31, 3-3 Year 4, is as follows: LO4 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. Davis's 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. (b) Assume that Davis issued 130,000 ordinary shares, with a market value of $8 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. (ii) Prepare the statement of financial position of Bagley