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QUESTION 2 (45 Marks) Munchies and Granolas Ltd (a residentcompany) manufactures different brands of break-fast cereals in theRepublic. The company is registered for VAT purposes. The followingpreliminary income statement of the company for the financial year1 November 2021 to 30 September 2022 is at your disposal. Allamounts exclude VAT, unless stated otherwise. R Sales 282 500 200Less: Cost of sales (107 400 300) Gross profit (taxable) 175 099900 Add: Other income Interest received 1 5 160 000 Profit on saleof asset 2 500 000 Income 180 759 900 Less: Operating expenses (165370 815) Repairs and moving costs 3 445 000 Depreciation 2 9 248256 Leasehold improvements and related expenses 4 23 620 000 Baddebts – trade debtors 125 000 Salaries and wages 5 33 344 759Scientific research expenditure 6 1 705 000 Trade mark 7 38 800Other tax-deductible expenditure 96 844 000 Net profit before tax15 389 085 Notes: Note 1: Munchies and Granolas Ltd earned intereston investments at local financial institutions. Note 2: Profit onsale of fixed asset and depreciation provided:  Machine B (with atax value of Rnil) was sold for R360 000 (less than the originalcost) on 30 November 2021 to a nonconnected party.  Manufacturingmachine C (new) was purchased on 1 June 2022 for R2 500 000(including all related qualifying costs), and brought into use on 1July 2022 in the new industrial building in Cape Town.  Twodelivery trucks were purchased for R420 000 each on 1 June 2022 andwere immediately bought into use. The approved write-off period ontrucks in terms of Interpretation Note No. 47 is four years.  Theindustrial (factory) building was erected in Gauteng during 2008 ata total cost of R20 255 000, and brought into use on 1 September2008.  A contract was concluded on 1 July 2021 to erect a newoffice block at a cost of R8 000 000 in Gauteng. The office blockwas brought into use on 1 February 2022.  Depreciation on motorvehicles and office equipment amounts to R6 900 250 and correspondswith the allowable writeoff periods as stated in InterpretationNote No. 47. Note 3: Repairs and moving costs consist of: Machine D(fully written off for tax purposes) was upgraded, and the machinenow produces twice its former production output. The machine is asgood as new. The cost of the original machine amounted to R200 000.The cost of the R275 000 upgrade qualifies for a 40% allowance interms of section 12C 275 000 Machine E (fully written-off for taxpurposes) was moved to the new factory in Cape Town (note 4), andbrought into use on 1 July 2022. 120 000 Foundation relating tomachine E 50 000 445 000 Note 4: On 31 October 2021, the companysigned a 20-year lease contract with immediate effect. In terms ofthe contract, Munchies and Granolas Ltd had to erect anotherindustrial building at a cost of R20 000 000 on the same premises.The lessor gave no further specifications. The building wascompleted on 30 June 2022 at a cost of R23 000 000, and broughtinto use on 1 July 2022. The lease premium of R500 000 was paid onthe signing of the contract, and the monthly rental of R15 000 waspayable from the signing of the lease contract. The originalindustrial building was occupied and brought into use immediatelyafter the signing of the lease agreement. Note 5: The followingtransactions relate to the amount of salaries and wages deducted inthe income statement:  One of the research assistants resigned dueto differences between herself and the supervisor. She accepted anamount of R90 000 as part of a restraint of trade agreement. Therestraint of trade agreement is valid for a two-year period, andthe amount was paid on 31 August 2022.  On 1 February 2022,Munchies and Granolas Ltd entered into a six-month registeredlearnership agreement with one of its existing disabled employeeson an NQF level 7, Bran Brown. Munchies and Granolas Ltd complieswith all the requirements set by the Commissioner with regards tolearnership agreements, in terms of section 12H.  All otheramounts included in salaries and wages are tax deductible. Note 6:Munchies and Granolas Ltd conducts qualifying technologicalresearch and development activities. The research activities wereapproved by the Department of Science and Technology. Themanagement of Munchies and Granolas Ltd decided to employ a team ofexperts, in order to create a new nutritious, affordable breakfastcereal. A patent would ultimately be registered in terms of thePatents Act. The following amounts were spent during the period 1May 2022 to 30 September 2022: R Cost of laboratory (exclusivelyused for this research), brought into use for the first time on 1May 2022 900 000 New and unused machinery (exclusively used forthis research) for the laboratory, brought into use on 2 May 2022350 000 Research assistants’ salaries 440 000 Materials consumed 15000 705 000 Note 7: During the year, Munchies and Granolas Ltdregistered its environmentally friendly logo as a trade mark to beincluded on all future product packaging. The cost of registeringthe trademark amounted to R38 800. YOU ARE REQUIRED TO: Calculatethe taxable income of Munchies and Granolas Ltd for its year ofassessment ending on 30 September 2022, starting with the netprofit before tax of R15 389 085.