Question 1 and Question 2 relates to the information given below:

On I October x9, P plc acquired 80 percent of the equity share capital of S plc. The consideration consisted of two elements: a share exchange of three shares in P for every five shares in S and the issue ofRM100 6% loan notes for every 500 shares acquired in S plc. The share issue has not yet been recorded by P plc, but the issue of the loan notes has been recorded. At the date of acquisition, the shares of P plc had a market value of RM5 each and the shares in S plc had a stock market price ofRM3.50 each. Below are the summarized draft financial statements of both companies.

Statements of Profit and loss for the year ended 30 September x10 P plc S plc RM'OOO RM'OOO Revenue 92,500 45,000 Cost of sales -70 500 -36 000 Gross profit 22,000 9.000 Operating expenses -8,000 3.600 Finance cost -180 NII Operating profit 13,820 5 400 Taxation -3 820 -1 500 Profit after tax 10,000 3.900 Other comprehensive income: Gain on revaluation of land 500 NIL Total comprehensive income 10 500 900Statement of Financial Position as at 30 September x10 P plc S plc RMOOO RM'OOO Non-current assets Property, plant and equipment 25,500 13,900 Investments 1.800 NIL Current assets 12 500 2 400 39 800 16 300 12 million ordinary shares 12,000 5 million ordinary shares 5,000 Land revaluation reserve at 30 September x9 2.000 NIL Other equity reserve at 30 September x9 500 NIL Retained earnings 12.300 4,500 Non-current liabilities 6% loan notes 3.000 NIL Current liabilities 10 000 6 800 39 800 16 300