Question 1 Dorae Berhad acquired 60% interest in the issued share capital of Nobi Berhad on 31 December 2020. The consideration was RM10 millions of which RM2 millions were in cash and the balance by an issue of 2 million Dorae Berhad ordinary shares valued at RM4 millions. At the acquisition date, the retained profits of Nobi Berhad were RM4 millions. Apart from recording the cash paid, Dorae Berhad has not recorded the issuance of shares to reflect the acquisition. The statement of financial position of both companies for the year ended 31 December 2021 were as follows: Dorae Berhad Nobi Berhad RM'000 RM'000 RM'000 RM'000 Share capital 16,000 10,000 Revaluation reserves 5,000 Retained profits 18,000 10,000 39,000 20,000 7,000 5,000 46,000 25,000 Long term loans Property, plant and equipment Freehold land, at cost 8,000 4,000 Others non-current assets, at net book value 30,000 38,000 16,000 20,000 Investment in Nobi 2,000 Berhad Current assets 18,000 15,000 Current liabilities (12,000) 6,000 (10,000) 5,000 46,000 25,000 At the acquisition date, the freehold land of Nobi Berhad was said to have a fair value of RM6 millions. No adjustment was made for this value. On 31 December 2021, Nobi Berhad on the advice of professional valuer, placed a valuation on an existing use basis of RM10 millions on the freehold land. This new valuation has not been incorporated in the statement of financial position. The directors wish to incorporate this new valuation in the final accounts. The movements in the retained profits of the two companies for the year ended 31 December 2021 were as follows: Retained profit for the year Retained profits brought forward Dorae Berhad RM'000 Nobi Berhad RM'000 3,000 2,000 15,000 8,000