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 70 000 Plant and equipment fair value $250 000; carrying amount in the books of ABC Ltd $170 000 Land fair value $300 000; carrying amount in the books of ABC Ltd $200 000 There are also legal fees of $190 000 involved in acquiring Red-X Ltd. On 1 July 2021 Red-X Ltd’s statement of financial position shows total assets of $300 000 and liabilities of $300 000. The fair value of the assets is $800 000. 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 |
70 000 |
|
Plant and equipment |
fair value $250 000; carrying amount in the books of ABC Ltd $170 000 |
|
Land |
fair value $300 000; carrying amount in the books of ABC Ltd $200 000 |
There are also legal fees of $190 000 involved in acquiring Red-X Ltd.
On 1 July 2021 Red-X Ltd’s
Required:
Has any
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