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 $22 000 each and were ordered on a FOB basis. Details of the order are as follows:

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

- Shipped on the 16th of July 2021

- Arrived in South Africa on the 30th July 2021

Due to the technical and complex nature of the new machines, further costs were paid on the 31st 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 R25 000

- The machines were extremely complex, and staff had to be retrained. Costs for training staff on how to use use the new machinery costed R25 000

- Costs to dispose of the brake pads that failed the safety tests during the testing phase, R1 000.

The machines were available for use on the 1 st of September 2021 and were first brought into use on the 1st of October 2016. The machines have a residual value of R10 000 and a useful life of 10 years. Depreciation is to be provided on the straight line method. Lineos Limited paid the supplier on the 31st of August 2021.

Exchange rates:

Date SA Rand US Dollar

25th May 2021 15.00 1

16 th July 2021 15.25 1

30th July 2021 15.60 1

31st August 2021 15.90 1

1 st September 2021 15.91 1

31st December 2021 15.99 1

Required

Show all the required journals in the books of Lineos Limited for the year ended 31st of December 2021. Please include dates and narrations. Ignore tax.