Haruko Hinoki owns a sole trader business selling wooden furniture and other items. Haruko also hand crafts cedar wood furniture and other items for high-end customers. On 31 October 2023, Haruko extracted the following trial balance.

Trading account:	£	£
Sales		2,234,500
Opening inventory	750,500
Purchases	1,250,000
Other revenue and expenses
Other income		50,000
Rent	70,000
Heating and lighting	12,300
Advertising expense	25,000
Wages and salaries	120,700
Motor expenses	34,000
Discounts allowed	25,000
Balance sheet accounts:
Motor vehicle at cost	100,000
Motor vehicle - accumulated depreciation		20,000
Equipment at cost	250,000
Equipment - accumulated depreciation		75,000
Receivables	580,000
Allowance for receivables		15,000
Bank	85,000
VAT liability		88,500
Payables		299,500
Long-term loan		300,000
Capital		350,000
Drawings	130,000
	Total 3,432,500	Total 3,432,500

The following information is relevant: 

1. The closing inventory on 31 October 2023 was valued at £565,400.
2. Included in other income is a payment of £5,000 received in advance for a cedar wood bathtub that Haruko will deliver to the customer in December 2023.
3. Haruko depreciates her motor vehicle on the reducing balance basis by 20% per annum.
4. Haruko depreciates her equipment on the straight-line basis by 15% per annum.
5. Haruko expects that £12,800 due from customers will be irrecoverable and must be written off.
6. The allowance for irrecoverable receivables is to be set at 5% of net receivables at the year end.
7. On 1 September 2023, Haruko had paid £15,000 of rent for the three months until 30 November 2023.
8. On 1 August 2023, Haruko had paid £12,000 for advertising for the four months until 30 November 2023.
9. Haruko estimates that an accrual for heating and lighting expenses of £2,000 is required.
10. The long-term loan is repayable in 10 years' time. Interest payable on the loan is 9% and will be paid once per year.

Required: 

a. Prepare Haruko Hinoki's income statement for the year ended 31 October 2023.

Remember to show all your workings clearly.

 

b. Prepare Haruko Hinoki's balance sheet as at 31 October 2023.

Remember to show all your workings clearly. 

Answer rating: 100% (QA)

Here are the answers a Haruko Hinokis Income Statement for the year ended 31 October 2023 Sales 2234... View the full answer