QUESTION 2 (40 marks) (48 minutes) The following balances were extracted from the books of Ngcobo Ltd for the financial year ended 29 February 2021: Total sales (including VAT at 15%) (note 1) Bank charges. Salaries and wages (note 2) Advertising Auditors' remuneration Fees for audit Expenses Distribution cost R 2 300 000 12 850 500 000 27 500 10 000 2 000 67 000 Other operating expenses (including finance cost and depreciation). 92 500 Lease payments (note 3). 24 000 Other operating income (note 5). 19 000 Proceeds on sale of motor vehicle. 42 500 Equipment at carrying amount.... 24 000 Motor vehicles at cost (note 7). 120 000 Accumulated depreciation: Motor vehicles (note 7) 30 000 Investments (note 6). 230 000 Loan to Maraisane Limited... 40.000 Long-term loan: HL Bank (Cr) (note 4) 45 000 Income tax expense.. 37 000 Additional information: 1. Ngcobo Ltd maintains a gross profit percentage of 40% on turnover. 2. Included in salaries and wages is the directors' remuneration of R150 000 per annum. 3. Ngcobo Ltd entered into a non-cancellable lease on 1 July 2020 to lease a printing machine for the use of the company. The contract is a lease in terms of IFRS 16. The following information is applicable to the lease contract: The initial lease term is three years. An initial payment of R8 526 was made. The lease payments are R3 000 per month for the first 6 months. The lease payments thereafter are R2 000 per month until the end of the three years. All actual lease payments made by Ngcobo Ltd are included in the operating expenses above. Ngcobo Ltd has the option to extend the lease term by a further two years at R1 000. At the commencement of the lease term Ngcobo Ltd is reasonably certain that it will exercise the option to extend the lease term by a further two years. 5% of every lease payment goes towards covering the maintenance costs incurred by and is to be paid for by the lessor. These values are similar to those with costs for similar maintenance services rendered by third parties.