Q7 Business Combination 11 Points Q7.1 9 Points Jerry Ltd has received an attractive takeover offer for its business from Tom Ltd. This offer was accepted by the shareholders of Jerry Ltd. The purchase agreement negotiated by Tom Ltd and Jerry Ltd was for Tom Ltd to take over all the assets of Jerry Ltd (except cash) on 1 July 2021. The purchase consideration consisted of the following: 2 shares in Tom Ltd for every 5 shares in Jerry Ltd. Jerry Ltd had one million shares outstanding. The market value of Tom Ltd.'s shares was $2.20 at the transfer date. Share price of Jerry Ltd was $0.50 at the transfer date. Share issue expenses paid were $1,000.. Tom Ltd to pay sufficient cash to Jerry Ltd to settle its liabilities. A piece of vacant land valued at $500,000 (currently recorded at $350,000) in Tom's books was to be transferred to Jerry Ltd as part settlement of the purchase consideration. The Balance sheet of Tom Ltd and Jerry Ltd on 1 July 2021 is as follows: Tom Ltd Jerry Ltd Assets Land 1,300,000 Buildings 600,000 500,000 Furniture & Fittings 250,000 200,000 Inventory 80,000 50,000 Accounts receivable 190,000 60,000 Cash 200,000 80,000 Liabilities (160,000) (90,000) Accounts payable Loan payable (130,000) (150,000) 2,330,000 650,000 Equity Share capital 1,700,000 500,000 Retained profits 630,000 150,000 2,330,000 650,000 All the net assets of Jerry Ltd are recorded at fair value except for the following: Fair Value ($) 1,200,000 Buildings Furniture & Fittings 150,000 The business combination was completed and Jerry Ltd went into liquidation. Required: Prepare the journal entries in the books of Tom Ltd to reflect the acquisition of Jerry Ltd. Ignore any tax impact