Question 3 [30 Marks 45 minutes] Forbes is a small factory that manufactures machinery for use in the production of personal protective equipment for medical staff. Forbes Limited is registered for VAT and the VAT rate is 15%. During the financial year ended 30 September 2021, the following transactions took place with regards to the factory's property, plant, and equipment. 1. The depreciation methods and opening balances as of 1 October 2020 for the property, plant and equipment accounts were as follows: Cost Accumulated depreciation Depreciation methods R2 000 000 R550 000 5% straight line (Zero residual value) Buildings 600 000 480 000 20% straight line (zero residual value) Machinery 10 000 20% straight line (zero residual value) Office equipment 600 000 218 750 25% reducing balance (zero residual value) Motor vehicles 40 000 II. On 31 May 2021, a spark set off a fire in the factory. Fortunately, there was only insignificant damage to the factory building and other assets. The machinery of the company was, however, damaged beyond repair. An EFT for R456 000 was made in the favour of the company on 30 June 2021 from Liberty Insurance 09:53 A 2021/10/ III. IV. A piece of machinery labeled as DX2 was purchased for R287 500 (VAT inclusive) on 1 July 2021. This machine was paid in cash and will be depreciated over eight years on a straight-line basis. The machine was available for use as intended on 1 July 2021. Residual value was estimated to be zero. Thereafter, the management manufactured a piece of machinery (DQM1) they required in the business operations. The following amounts were incurred and where applicable paid for through electronic funds transfer methods on dates indicated. Date R Cost of new spare parts (VAT inclusive) 172 500 3 July 2020 Internal labour on the project-forming part of wages of 30 000 5 August 2020 the company Payment to a construction company for alteration to the 51 750 16 August 2020 buildings to accommodate the new machine (VAT inclusive) 17 250 10 September 2020 inclusive) New air Conditioning system for the new machine (VAT Cost of testing the new machine (VAT Inclusive) 28 750 22 September 2020 Architect's fees (non-VAT vendor) 5 000 20 August 2020 The machine was brought into use on 30 September 2020. It is expected that the useful life of five years and a residual value of R15 000. It will be depreciated using the straight-line basis. 09: 2021 CACN012: FINANCIAL ACCOUNTING IB You are required to: a) Record the transactions pertaining to the property, plant and equipment for the financial year ended 30 September 2020 in the general journal of the company. Narrations are not required, and answer should be in accordance with IAS16 [26 marks] b) Prepare an extract of the cash flow statement to show the net cash flow from investing activities for the financial reporting period ended 31 October 2020. [4 marks]