QUESTION $1(22$ marks$)(44$ minutes$)$ Extracts from the financial information of Kgalo Ltd and Gum Ltd on $31$ July $2024$ are presented below: On $1$ August $2024,$ the trainee accountant of Kgalo Ltd prepared the pro$-$forma journal entries below in preparation for consolidated financial statements of the group for the year ended $31$ July $2024.$ The journal narrations correctly describe the journal entries that should be performed. Kgalo Ltd acquired $80\%$ interest in the ordinary shares of Gum Ltd$,$ on $1$ September $2022.$ On the date of acquisition, the net asset value of Gum Ltd consisted of: share capital amounting to R$840000,$ retained earnings of R$355000$ and a revaluation surplus of R$165000.$ However, the fair value of equity in Gum Ltd amounted to R$1415000.$ The increased fair value amount is because of an increase in revaluation surplus, resulting from land and buildings at date of acquisition. Since acquisition to $1$ August $2023,$ Gum Ltd has accumulated profits amounting to R$145300.$ The revaluation surplus amounted to R$265000$ on $1$ August $2023.$ Profit for the current year amounted to R$136700.$ During the current financial year Gum Ltd sold inventory to Kgalo Ltd to the total amount of R$290000$ at $15\%$ mark$-$up on cost$.$ Inventory on hand in Kgalo Ltd on $31$ July $2023,$ of purchases from Gum Ltd amounted to R$125000.$ Dr R Cr R Recording of non$-$controlling interest in revaluation surplus of Gum Ltd since acquisition to $1$ August $2023$ JOURNAL B Retained earnings $(355000+145300)$ x $80\%)$ Non$-$controlling interests $($P$/$L$)(355000+145300)$ x $20\%)400240100060$ Non$-$controlling interests $($SFP$)$ Recording of non$-$controlling interest in retained earnings of Gum Ltd since acquisition to $1$ August $2023(355000+145300)$ x $20\%1000607$ QUESTION $1($continued$)$ REQUIRED: Marks PART A Review the pro$-$forma journal entries presented in the question for the Kgalo Ltd Group, and answer the required below: a$)$ Determine if the pro$-$forma journal entries are correct or not. If it is correct, re$-$writethe pro$-$forma journal entries into your answer sheet. If it is not, provide the correctpro$-$forma journal entries. $9$ b$)$ Discuss the reasons why the journal entries are prepared. Your answer shouldalso include: $($i$)$ the reason for debiting$/$ crediting the accounts in the journal. $($ii$)$ How this is treated and disclosed in the financial statements $12$ Communication mark $($logical flow of discussion$)$ Take note: $$ Calculations are required. No marks will be awarded for final or total amounts unlessthe amounts are supported by relevant calculations. $$ Journal narrations are not required. $$ Show all calculations and round all amounts to the nearest Rand. $$ Ignore the taxation effect of unrealised profits and$/$or losses, as well as capital gainstax.