$1$

QUESTION ONE $[22]$

Lineos Limited, a South African vehicle brake pad making company, bought $5$ industrial

machines to use in the manufacture of their new brake pad range for the taxi industry. The

machines were imported from a supplier in America at a cost of $$22000$ each and were

ordered on a FOB basis. Details of the order are as follows:

$-$ Ordered from the supplier on the $25$th of May $2021$

$-$ Shipped on the $16$th of July $2021$

$-$ Arrived in South Africa on the $30$th July $2021$

Due to the technical and complex nature of the new machines, further costs were paid on the

$31$st of July $2021$ to bring them into operation. The breakdown of the further costs was as

follows:

$-$ The mixers had to be professionally installed: the installation was completed by a local

specialist at a cost of R$25000$

$-$ The machines were extremely complex, and staff had to be retrained. Costs for training

staff on how to use use the new machinery costed R$25000$

$-$ Costs to dispose of the brake pads that failed the safety tests during the testing phase,

R$1000.$

The machines were available for use on the $1$st of September $2021$ and were first brought into

use on the $1$st of October $2016.$ The machines have a residual value of R$10000$ and a useful

life of $10$ years. Depreciation is to be provided on the straight line method.

Lineos Limited paid the supplier on the $31$st of August $2021.$

Exchange rates:

Date Spot Rate

SA Rand US Dollar

$25$th May $202115\mathrm{.}001$

$16$th July $202115\mathrm{.}251$

$30$th July $202115\mathrm{.}601$

$31$st August $202115\mathrm{.}901$

$1$st September $202115\mathrm{.}911$

$31$st December $202115\mathrm{.}991$

$2$

Required

Show all the required journals in the books of Lineos Limited for the year ended $31$st of

December $2021.$ Please include dates and narrations.

Ignore tax.