QUESTION 2 (40 marks) POM acquired 80% of the share of SOM for $26,550 on 1 Jan 2019, the date of acquisition (DOA). At this date, the equity of SOM consisted of share capital of $15,000 and retained earnings of $12,250. At 1 Jan 2019, all the identifiable assets and liabilities of SOM were recorded at fair value except for the following: Plant Carrying amount Fair value $7,500 $10,000 The plant had a remaining useful life of 5 years with depreciation based on the straight-line method. The fair value of the non-controlling interest (NCI) in SOM on DOA was $6,000. Tax rate is 10%. On 1 Jan 2021, POM acquired 30% of the shares of AOM for $7,450. Significance influence on AOM was obtained as a result. At this date, AOM's equity consisted of the share capital of $7,500 and retained earnings of $11,250. AOM made a profit of $5,200 for the year ended 31 Dec 2021. The following intra-group or inter-entity transactions happened in the period from 1 Jan 2021 to 31 Dec 2021 1. On 1 Jan 2021, POM held an inventory of $2,500 purchased from SOM during the year ended 31 Dec 2020. The inventory had been manufactured by SOM at a cost of $1,600. The inventory was sold by POM for $3,000 to a third party during the year 2021. 2. In 2021, SOM sold inventory costing $6,000 to POM for $9,000 and 35% of these inventories were still on hand at 31 Dec 2021. 3. In Jan 2021, POM Ltd sold a plant costing $8,000 to SOM Ltd for $10,000. SOM Ltd applies a straight-line 20% per annum on cost for its depreciation. 4. SOM made profits of $9,000 in 2019 and 2020. And it further made a $3,750 profit for the year ended 31 Dec 2021.