Question 2 (7 marks) XYZ Ltd acquires 100 per cent of Red-X Ltd on 1...
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Accounting
Question 2 (7 marks)
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.
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