$5\mathrm{.}1.$ Identify five $(5)$ scenarios where intragroup transactions could be eliminated

$(5$ marks$)$

$5\mathrm{.}2.$ On $1$ January $2020$ Company $\backslash (\backslash$boldsymbol$\{$A$\}\backslash )$ acquired a $70\backslash \%$ controlling interest the ordinary share capital of Company B$.$

Machinery that was purchased for R$4000000,$ with a carrying amount of R$3700000,$ was considered to be undervalued by R$600000.$ The machine has a remaining using life of $5$ years and carries no residual value.

The summer rain in the Limpopo region resulted in multiple flash floods on Company B$\text{'}$s premises. The machine that was undervalued on the date Company $\backslash (\backslash$boldsymbol$\{$A$\}\backslash )$ acquired its interest in Company $\backslash (\backslash$mathbf$\{$B$\}\backslash )$ has been severely affected by these flash floods. Subsequently, there has been a significant reduction in production capacity of this machine and this is due to the constant breakdowns and repairs that have been required since the floods

On $30$ September $2020,$ a mechanical specialist has assessed the condition of the machine and has determined the value in use of this machine as R$2400000,$ however this machine has a fair value of R$2000000$ and the cost to sell is negligible.

The group accountant is uncertain about the pro$-$forma journal entry that needs to be processed in response to the mechanical specialist's assessment. The following journal entry was processes by the group accountant:

Dr$.$ Impairment loss $($SP$\backslash$&L$)$

$1255000$

Cr$.$ Accumulated Impairments $($SFP$)$

$1255000$

Accounting for the impairment of the machine

REQUIRED:

Review the pro$-$forma entry processed by the Group Accountant as it relates to the impairment of the machine in Company B$.$ Discuss the error made by the group accountant; explain what the correct group accounting treatment should be in respect of the impairment; and propose an appropriate, correcting journal entry