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ABC Ltd acquires 100 per cent of RedCarpet Ltd on 1 July 2021. ABC Ltd pays the shareholders of RedCarpet Ltd the following consideration. There are also legal fees of $95 000 involved in acquiring RedCarpet Ltd. On 1 July 2021 RedCarpet Ltd’s statement of financial position shows total assets of $300 000 and liabilities of $150 000. The fair value of the assets is $400 000.   Question: Has any goodwill been acquired and, if so, how much? And discuss the potential for including associated legal fees into the cost of acquiring RedCarpet using appropriate accounting standard?

ABC Ltd acquires 100 per cent of RedCarpet Ltd on 1 July 2021. ABC Ltd pays the shareholders of RedCarpet Ltd the following consideration. There are also legal fees of $95 000 involved in acquiring RedCarpet Ltd. On 1 July 2021 RedCarpet Ltd’s statement of financial position shows total assets of $300 000 and liabilities of $150 000. The fair value of the assets is $400 000.   Question: Has any goodwill been acquired and, if so, how much? And discuss the potential for including associated legal fees into the cost of acquiring RedCarpet using appropriate accounting standard?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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ABC Ltd acquires 100 per cent of RedCarpet Ltd on 1 July 2021. ABC Ltd pays the shareholders of RedCarpet Ltd the following consideration. There are also legal fees of $95 000 involved in acquiring RedCarpet Ltd. On 1 July 2021 RedCarpet Ltd’s statement of financial position shows total assets of $300 000 and liabilities of $150 000. The fair value of the assets is $400 000.

 

Question:

Has any goodwill been acquired and, if so, how much? And discuss the potential for including associated legal fees into the cost of acquiring RedCarpet using appropriate accounting standard?

Cash 35 000 Plant and equipment fair value $125 000; carrying amount in the books of ABC Ltd $85 000 Land fair value $150 000; carrying amount in the books of ABC Ltd $100 000
Transcribed Image Text:Cash 35 000 Plant and equipment fair value $125 000; carrying amount in the books of ABC Ltd $85 000 Land fair value $150 000; carrying amount in the books of ABC Ltd $100 000
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