The accountant for Aeon Metals Ltd, Mr Harry Benedict, knows that AASB 3 has to be applied in accounting for business combinations. However, he is confused as to how to account for the gain on bargain purchase, what recognition criteria is applied to assets and liabilities acquired in the business combination, and how the varying dates such as the date of exchange and acquisition date will affect the accounting for the business combination.

On 1 July 2020, Aeon Metals Ltd acquired all of the assets and liabilities of Gum Ltd. In exchange for these assets and liabilities, Aeon Metals Ltd issued 120 000 shares that at date of issue had a fair value of $4.10 per share. Costs of issuing these shares amounted to $3000. Legal costs associated with the acquisition of Gum Ltd amounted to $6200.

The asset and liabilities of Gum Ltd at 1 July 2020 were as follows:

Carrying amount Fair value

Assets

Cash $1 000 $1 000

Accounts receivable 11 000 9 000

Inventory 65 000 69 000

Equipment 320 000 231 000

Accumulated depreciation equipment (96 000)

Patents 260 000 282 000

Liabilities

Accounts payable (17 000) (17 000)

Debentures (65 000) (65 000)

Prepare the acquisition analysis at 1 July 2020 for the acquisition of Gum Ltd by Aeon Metals Ltd.