Question: 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

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 79 100

Plant and equipment fair value $282 500; carrying amount in the books of ABC Ltd $192 100

Land fair value $339 000; carrying amount in the books of ABC Ltd $226 000

There are also legal fees of $214 700 involved in acquiring Red-X Ltd. On 1 July 2021, Red-X Ltds statement of financial position shows total assets of $339 000 and liabilities of $339 000. The fair value of the assets is $904 000.

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 standards.

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