QUESTION THREE (40 marks) Betty Cooper (Pty) Ltd (the company), a resident of the Republic, is...

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QUESTION THREE (40 marks) Betty Cooper (Pty) Ltd ("the company"), a resident of the Republic, is a company engaged in the manufacture of cake mixes. The company's financial year ends on the last day of February. Betty Cooper (Pty) Ltd is not considered to be a small business corporation. During the 2020 year of assessment, the company embarked on an expansion project, in order to meet an increase in the demand for their shoes. The following transactions were entered into as part of their expansion initiative (ignore VAT for 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. o A clause in the lease agreement stipulated that the lessee is to effect improvements to the building at a cost of R60 000. 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. QUESTION THREE (40 marks) Betty Cooper (Pty) Ltd ("the company"), a resident of the Republic, is a company engaged in the manufacture of cake mixes. The company's financial year ends on the last day of February. Betty Cooper (Pty) Ltd is not considered to be a small business corporation. During the 2020 year of assessment, the company embarked on an expansion project, in order to meet an increase in the demand for their shoes. The following transactions were entered into as part of their expansion initiative (ignore VAT for 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. o A clause in the lease agreement stipulated that the lessee is to effect improvements to the building at a cost of R60 000. 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.