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 RedCarpet using appropriate accounting standard.
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 RedCarpet using appropriate accounting standard.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments
Section: Chapter Questions
Problem 3P
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Transcribed Image Text:Question 3
ABC Ltd acquires 100 per cent of RedCarpet Ltd on 1 July 2021. ABC Ltd pays the shareholders of
RedCarpet Ltd the following consideration:
Cash
35 000
Plant and equipment
fair value $125 000; carrying amount in the books of ABC
Ltd $85 000
fair value $150 000; carrying amount in the books of ABC
Ltd $100 000
Land
There are also legal fees of $95 000 involved in acquiring RedCarpet Ltd.
On 1 July 2021 RedCarpet 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
RedCarpet using appropriate accounting standard.
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