Question: Question 2 (11 marks) XYZ Ltd acquires 100 per cent of Red-X Ltd on 1 July 2021. XYZ Ltd pays the shareholders of Red-X Ltd

Question 2 (11 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

98,723

Plant and equipment

fair value $352,581;

carrying amount in the books of XYZ Ltd $239,630

Land

fair value $423,097;

carrying amount in the books of XYZ Ltd $282,065

There are also legal fees of $267,962 involved in acquiring Red-X Ltd.

On 1 July 2021, Red-X Ltds statement of financial position shows total assets of $423,097 and liabilities of $423,097. The fair value of the assets is $1,128,260.

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 standards.

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