XYZ Ltd acquires 100 per cent of Red-X Ltd on 1 July 2021. XYZ Ltd pays the shareholders of Red-X Ltd the following consideration: Cash 91 835 Plant and fair value $327 983; equipment carrying amount in the books of ABC Ltd $222 912 Land fair value $393 579; carrying amount in the books of ABC Ltd $262 386 There are also legal fees of $249 267 involved in acquiring Red-X Ltd. On 1 July 2021 Red-X Ltd's statement of financial position shows total assets of $393 579 and liabilities of $393 575. The fair value of the assets is $1 049 544. Required: Has any goodwill been acquired and, if so, how much? And discuss the potential for including associated legal fees into the cost of acquiring Red-X using appropriate accounting standard.
XYZ Ltd acquires 100 per cent of Red-X Ltd on 1 July 2021. XYZ Ltd pays the shareholders of Red-X Ltd the following consideration: Cash 91 835 Plant and fair value $327 983; equipment carrying amount in the books of ABC Ltd $222 912 Land fair value $393 579; carrying amount in the books of ABC Ltd $262 386 There are also legal fees of $249 267 involved in acquiring Red-X Ltd. On 1 July 2021 Red-X Ltd's statement of financial position shows total assets of $393 579 and liabilities of $393 575. The fair value of the assets is $1 049 544. Required: Has any goodwill been acquired and, if so, how much? And discuss the potential for including associated legal fees into the cost of acquiring Red-X using appropriate accounting standard.
Chapter12: S Corporations
Section: Chapter Questions
Problem 15CE
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