Question 1 Jacob Berhad acquired 150,000 units (60 percent) of the ordinary shares in Baxter Sdn Bhd on 1 January 2021. As consideration, Jacob paid RM150,000 cash on the acquisition date. Other consideration transferred include ordinary share of Jacob, 2 shares for every 5 shares acquired in Baxter. Jacob has agreed to pay another RM108,000 in cash if Baxter records a net profit of RM80,000 for year ended 2021. Baxter's net profit in the last 2 years has averaged at RM78,000. Plant belonging to Baxter has a fair value of RM70,000 more than the carrying value on acquisition date. The plant's useful life is estimated to be 7 years on this date. Equipment belonging to Baxter was shown to have a fair value of RM30,000 but the carrying value is only RM25,000 on the acquisition date. Useful life this equipment is 4 years on this date. An extract of Baxter's SOFP as at 1 January 2021 is as follows: Ordinary shares Preference shares Revaluation reserve Retained earnings RM 320,000 50,000 10,000 20,000 The ordinary share price (market) for Jacob and Baxter was recorded as RM1.30 and RM1.80 respectively on acquisition date. Cost of capital is estimated to be 8 percent.