UV Q : QUESTION 2 [15 MARKS / 22.5 MINUTES] Energy Ltd manufactures and sells hydrating sports drinks loaded with replenishing electrolytes to health shops across South Africa. Energy Ltd is a VAT vendor and so are all entities it does business with. The current financial year ends 31 October 2021. Energy Ltd purchased a new bottling machine for R3 105 000 on 31 January 2021 for cash. The company incurred the following additional costs in respect of the machine: Transport costs amounting to R11 500 were paid cash to deliver the new bottling machine at the company's factory. Wages of R16 000 were paid to offload and install the new bottling machine. R28 750 to upgrade the bottling machine's software which will allow the machine to bottle the sports drinks at a much faster rate over its useful life. - R6 440 were spent to paint the bottling machine so that it will look prettier in the factory. All the additional costs incurred were paid in cash. The bottling machine was ready for use from 1 February 2021. The bookkeeper prepared the following journal entries to account for the new bottling machine in the accounting records of Energy Ltd for the financial year ended 31 October 2021: Ref Date Accounts Debit-R Credit-R J001 31/01/2021 Machinery at cost (SoFP) 3 105 000 Bank (SoFP) 3 105 000 [Recognise the purchase price of the new bottling machine acquired.) J002 10 000 16 000 30 600 31/01/2021 Transport expense (SOPL) Salaries and wage expense (SOPL) Repairs and maintenance (SOPL) [Repairs and maintenance = cost of software upgrade + paint] VAT control (SoFP) Bank (SoFP) [Recognise additional expenditure incurred in respect of the new bottling machine acquired.] 6 090 62 690 MARKS REQUIRED Discuss whether or not the journal entries prepared by the accountant is correct. Support your answer by providing the correct journal entries for the above purchase of the machine where applicable. [15] 6 Page UV Q : QUESTION 2 [15 MARKS / 22.5 MINUTES] Energy Ltd manufactures and sells hydrating sports drinks loaded with replenishing electrolytes to health shops across South Africa. Energy Ltd is a VAT vendor and so are all entities it does business with. The current financial year ends 31 October 2021. Energy Ltd purchased a new bottling machine for R3 105 000 on 31 January 2021 for cash. The company incurred the following additional costs in respect of the machine: Transport costs amounting to R11 500 were paid cash to deliver the new bottling machine at the company's factory. Wages of R16 000 were paid to offload and install the new bottling machine. R28 750 to upgrade the bottling machine's software which will allow the machine to bottle the sports drinks at a much faster rate over its useful life. - R6 440 were spent to paint the bottling machine so that it will look prettier in the factory. All the additional costs incurred were paid in cash. The bottling machine was ready for use from 1 February 2021. The bookkeeper prepared the following journal entries to account for the new bottling machine in the accounting records of Energy Ltd for the financial year ended 31 October 2021: Ref Date Accounts Debit-R Credit-R J001 31/01/2021 Machinery at cost (SoFP) 3 105 000 Bank (SoFP) 3 105 000 [Recognise the purchase price of the new bottling machine acquired.) J002 10 000 16 000 30 600 31/01/2021 Transport expense (SOPL) Salaries and wage expense (SOPL) Repairs and maintenance (SOPL) [Repairs and maintenance = cost of software upgrade + paint] VAT control (SoFP) Bank (SoFP) [Recognise additional expenditure incurred in respect of the new bottling machine acquired.] 6 090 62 690 MARKS REQUIRED Discuss whether or not the journal entries prepared by the accountant is correct. Support your answer by providing the correct journal entries for the above purchase of the machine where applicable. [15] 6 Page