Question 3 (20 Marks) You have just received the following e-mail from Ben, a friend of yours who works at Building Together Pty (Ltd), a construction company based in Woodstock. You are required to answer questions asked by Ben in the mail. Hi Tshego. The construction manager that I report to has asked for feedback on a number of issues relating to the treatment of PPE for the year ended 31 July 2013. I really need your help as I am a little uncertain where to start with answering her questions. So here goes.... 3.1 On 1 August 2012, Machine A was delivered to the premises of Building Together Pty (Ltd). On this date the machine was recognised at an amount of R1 800 000. On 31 July 2013, the business paid the supplier R2 070 000. The payment period was longer than normal credit terms. Please explain why the business recognised Machine A at a different amount to the amount paid to the supplier on 31 July 2013. (5 marks) 3.2 Building Together Pty (Ltd) ordered Machine B from a supplier in Gauteng on 2 July 2013. The purchase price of Machine B amounted to R765 000. The contract indicated that the machine would be sent by truck, FOB shipping point, on 28 July 2013 and would be paid for in full on the date of delivery. The machine is expected to be delivered to our business premises on 21 August 2013. The bookkeeper has already recognised the machine and the amount of R765 000 is already sitting in the PPE: Machinery account. How can this be? It is not physically on the business premises AND it has not been paid for! Please provide the general journal entry/ies that would be processed on the dates underlined. If no journal entry is required, please provide a reason for this. (5 Marks) 3.3 The construction manager indicated that delivery costs for Machine B (in question 3.2 above) will amount to R15 600 and installation costs will amount to R36 000. I need to tell her where to record these costs and why. Am I correct in saying these costs should be debited to the delivery expenses and installation expenses accounts in the general ledger? Please indicate whether or not I am correct, in either case please be clear as to HOW these costs should be treated and why they should be treated in this way. (5 Marks) 3.4 On 1 October 2011, Building Together Pty (Ltd) purchased an eight-wheeler truck for delivery of sand and stone. The truck was ready for use on the purchase date. The truck had a purchase price of R870 000 and a residual value of R160 000 and was expected to be used evenly over 6 years. On 28 February 2013, the business purchased and installed an additional unit to the truck that sweeps excess stone and sand off the back of the truck. The total cost of the unit (including installation) amounted to R195 000. It is expected that the new unit will be disposed of on the same date as the truck. The new unit has a residual value of R35 000. Please calculate the depreciation expense for the year ended 31 July 2014. (5 Marks)