QUESTION $1$

$($a$)$ Explain, with reasons, the errors and$/$or omissions made by the junior accountant in drafting the at$-$acquisition proforma journal entry relating to GG$\text{'}$s acquisition of Titan on $1$ September $2023.$

Titan Tech $($Pty$)$ Ltd

Titan is a prominent computer hardware manufacturer based in South Africa that specializes in producing a wide array of computer components including processors, motherboards, and storage devices. These high$-$quality components are supplied to electronic retailers across the country. GG realised that by obtaining a controlling interest in Titan, it could reduce the costs of acquiring computer components.

On $1$ September $2023,$ GG acquired a $75\%$ controlling interest in Titan by purchasing ordinary shares from Titan's existing shareholders, who are unrelated to the GG group.

On $31$ March $2023,$ Titan's equity consisted of ordinary share capital of R$1400000($which remained unchanged throughout FY$2024)$ and retained earnings of R$2875000.$ This information was confirmed in Titan's FY$2023$ audited annual financial statements.

All Titan's assets and liabilities were fairly valued on $1$ September $2023,$ except for the following items:

On $1$ September $2023,$ the carrying amount of Titan's warehouse building $("$the warehouse"$),$ used to store Titan's inventory, was correctly determined to be R$3600000.$ On the same date the fair value of the warehouse was R$3800000.$ The fair value adjustment on the warehouse was correctly calculated to be an amount of R$200000.$

The warehouse was purchased on $1$ September $2019$ at a cost of R$4500000$ and on the date of purchase, it had an estimated useful life of $20$ years, with a nil residual value. These estimates remained unchanged.

The South African Revenue Services $($SARS$)$ grants capital allowances of $5\%$ per annum $($not apportioned for periods shorter than a year$)$ on the warehouse.

GG agreed to pay the following consideration to Titan's previous shareholders in exchange for the $75\%$ controlling interest in Titan:

A cash amount of R$3500000$ payable one year after acquisition date, on $31$ August $2024.$ No interest will be charged on this amount. This payment arrangement is beyond the normal credit term of three months.

A forklift used in the warehouse, which had a carrying amount of R$1200000$ and fair value of R$1400000$ on $1$ September $2023.$

GG elected to measure the non$-$controlling interest relating to this business combination at their fair value. The fair value of the non$-$controlling interest on $1$ September $2023$ was correctly determined to be an amount of R$1250000.$

$2\mathrm{.}1$ Draft at$-$acquisition journal entry

GG$\text{'}$s junior accountant posted the following at$-$acquisition proforma journal entry on $1$ September $2023$ to account for Titan in the GG group financial statements:

$\backslash$table$[[$Account$,$Debit,Credit$],[$Dr Share capital $($EQ$),1400000,],[$Dr Retained earnings $($EQ$),2875000,],[$Dr Buildings $($SFP$),200000,],[$Dr Gain on bargain purchase $($P$/$L$)$ Balancing,$1576150,],[$Cr Deferred tax $($SFP$),,4320013$

Your answer should not include calculations or amounts.

You are not required to prepare correcting journal entries.

Recommendations are not required.