2UESTION THREE (40 marks) setty Cooper (Pty) Ltd ("the company"), a resident of the Republic, is a company ngaged in the manufacture of cake mixes. The company's financial year ends on the ast day of February. Betty Cooper (Pty) Ltd is not considered to be a small business orporation. During the 2020 year of assessment, the company embarked on an xpansion project, in order to meet an increase in the demand for their shoes. The ollowing transactions were entered into as part of their expansion initiative (ignore VAT or the purposes of this question): - Betty Cooper (Pty) Ltd conducts its manufacturing business from a building it purchased for R900 000 (of which R200 000 related to the land) on 1 June 2010. Due to the expansion project underway, a need arose to acquire additional premises. The company entered into a 20 -year lease agreement on 1 January 2020 with the owner of the adjacent building, who is also a registered taxpayer. Betty Cooper (Pty) Ltd took occupation immediately and began production in the leased building. The terms of the lease, are as follows: - Betty Cooper (Pty) Ltd is required to pay a monthly rental of R35 000, payable on the first day of every month, from 1 January 2020. - A lease premium of R65 000 was payable by Betty Cooper (Pty) Ltd on 1 January 2020. - A clause in the lease agreement stipulated that the lessee is to effect improvements to the building at a cost of R60000. The improvements were completed and brought into use on 1 February 2020, at a cost of R100 000 . The improvements to the building are considered to be used in the process of manufacture. - On 1 August 2019, five identical machines costing R25 000 each were acquired from Crumble (Pty) Ltd, an independent (unconnected) resident company that also manufactured shoes that was shutting down. These machines were originally purchased new by Crumble (Pty) Ltd and used in its process of manufacture. Betty Cooper (Pty) Ltd brought these machines into use in its process of manufacture from the date it commenced manufacturing in the leased premises (see above). The market value of each machine on the date of purchase was R30 000 . - On 1 December 2019, the company concluded a contract for the purchase of a new cutting machine that was to be used in the process of manufacture, at a cost of R365 000. The supplier of the machine agreed to a delivery date of 15 January 2020 but due to the supplier's employees going on strike, the machine was only delivered on 15 February 2020 . Due to the delay, the supplier agreed to a lower selling price of R315000. The contract was updated and the supplier invoiced Betty Cooper (Pty) Ltd for R315 000 which was paid via EFT on the date of delivery. Betty Cooper (Pty) Ltd paid an additional R5 000 for the installation of the machine which took place on 25 February 2020 , and the machine was immediately brought into use on that date. - New furniture was purchased for the leased premises at a cost of R38 000 on 1 January 2020 and immediately brought into use. - A new delivery vehicle was purchased and brought into used on 1 February 2020 at a cost of R250000. - The company owns other two delivery vehicles which were purchased on 1 March 2012 at a cost of R120 000 each, which have been fully written-off for tax purposes. On 15 February 2020 , one of these vehicles was sold for R50000. Additional information: - The Commissioner of SARS has approved the following write-off periods (on a straight-line basis): o Furniture 6 years and - Delivery vehicles 4 years. Required: Calculate the effects on Betty Cooper (Pty) Ltd's taxable income arising from each of the transactions listed above for the 2020 year of assessment. Round off to the nearest Rand. Show ALL workings. (40 marks) 2UESTION THREE (40 marks) setty Cooper (Pty) Ltd ("the company"), a resident of the Republic, is a company ngaged in the manufacture of cake mixes. The company's financial year ends on the ast day of February. Betty Cooper (Pty) Ltd is not considered to be a small business orporation. During the 2020 year of assessment, the company embarked on an xpansion project, in order to meet an increase in the demand for their shoes. The ollowing transactions were entered into as part of their expansion initiative (ignore VAT or the purposes of this question): - Betty Cooper (Pty) Ltd conducts its manufacturing business from a building it purchased for R900 000 (of which R200 000 related to the land) on 1 June 2010. Due to the expansion project underway, a need arose to acquire additional premises. The company entered into a 20 -year lease agreement on 1 January 2020 with the owner of the adjacent building, who is also a registered taxpayer. Betty Cooper (Pty) Ltd took occupation immediately and began production in the leased building. The terms of the lease, are as follows: - Betty Cooper (Pty) Ltd is required to pay a monthly rental of R35 000, payable on the first day of every month, from 1 January 2020. - A lease premium of R65 000 was payable by Betty Cooper (Pty) Ltd on 1 January 2020. - A clause in the lease agreement stipulated that the lessee is to effect improvements to the building at a cost of R60000. The improvements were completed and brought into use on 1 February 2020, at a cost of R100 000 . The improvements to the building are considered to be used in the process of manufacture. - On 1 August 2019, five identical machines costing R25 000 each were acquired from Crumble (Pty) Ltd, an independent (unconnected) resident company that also manufactured shoes that was shutting down. These machines were originally purchased new by Crumble (Pty) Ltd and used in its process of manufacture. Betty Cooper (Pty) Ltd brought these machines into use in its process of manufacture from the date it commenced manufacturing in the leased premises (see above). The market value of each machine on the date of purchase was R30 000 . - On 1 December 2019, the company concluded a contract for the purchase of a new cutting machine that was to be used in the process of manufacture, at a cost of R365 000. The supplier of the machine agreed to a delivery date of 15 January 2020 but due to the supplier's employees going on strike, the machine was only delivered on 15 February 2020 . Due to the delay, the supplier agreed to a lower selling price of R315000. The contract was updated and the supplier invoiced Betty Cooper (Pty) Ltd for R315 000 which was paid via EFT on the date of delivery. Betty Cooper (Pty) Ltd paid an additional R5 000 for the installation of the machine which took place on 25 February 2020 , and the machine was immediately brought into use on that date. - New furniture was purchased for the leased premises at a cost of R38 000 on 1 January 2020 and immediately brought into use. - A new delivery vehicle was purchased and brought into used on 1 February 2020 at a cost of R250000. - The company owns other two delivery vehicles which were purchased on 1 March 2012 at a cost of R120 000 each, which have been fully written-off for tax purposes. On 15 February 2020 , one of these vehicles was sold for R50000. Additional information: - The Commissioner of SARS has approved the following write-off periods (on a straight-line basis): o Furniture 6 years and - Delivery vehicles 4 years. Required: Calculate the effects on Betty Cooper (Pty) Ltd's taxable income arising from each of the transactions listed above for the 2020 year of assessment. Round off to the nearest Rand. Show ALL workings. (40 marks)