Cherie and Tony’s trial balance as at 31 December 2012 is set out below.

1. Closing inventory is £12,000.

2. £197 of the other expenses was prepaid and £200 is owed for the telephone.

3. Salaries will be £12,000 for Cherie and £10,000 for Tony.

4. Depreciation is fixed at 2% on the cost of land and buildings and 10% on the cost of plant and machinery.

5. Profits are shared in the ratio 2 for Cherie and 1 for Tony.

Required:

Prepare the income statement for the year ended 31 December 2012 and the statement of financial position as at 31 December 2012.

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Capital accounts: Cherie 30,000 Tony 35,000 Current accounts: Cherie 26,000 Tony 18,500 Drawings Cherie 21,294 Tony 18,321 Land and buildings at cost 203,500 Plant and machinery at cost Land and buildings accumulated depreciation as at 1 January 2012 Plant and machinery accumulated depreciation as at 1 January 2012 26,240 12,315 9,218 Trade receivables 18,613 Trade payables 2,451 Bank 25,016 Electricity 1,324 Wages 12,187 Telephone 1,923 Insurance 1,318 Long-term loan 83,000 Revenue 251,800 Sales returns 340 Purchases 128,317 Purchases returns 206 Other expenses 1,497 Opening inventory 8,600 468,490 468,490