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Discuss the potential for including associated legal fees

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Question - ABC Ltd acquires 100 per cent of Red-carpet Ltd on 1 July 2021. ABC Ltd pays the shareholders of Red-carpet Ltd the following consideration:

Cash 35,000

Plant and equipment fair value $125,000; carrying amount in the books of ABC Ltd $85,000

Land fair value $150,000; carrying amount in the books of ABC Ltd $100,000

There are also legal fees of $95 000 involved in acquiring Red-carpet Ltd.

On 1 July 2021 Red-carpet Ltd.'s statement of financial position shows total assets of $300,000 and liabilities of $150 000. The fair value of the assets is $400,000.

Required -

a) Has any goodwill been acquired and, if so, how much?

b) And discuss the potential for including associated legal fees into the cost of acquiring Red-carpet using appropriate accounting standard.

Reference no: EM132835435

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