Pierre is a furniture manufacturer. His financial year ends on 31 March. He provided the following information:

Additional information:

1. At 31 March 20–6 wages of factory operatives accrued amounted to $1,830.
2. At 31 March 20–6 rates and insurance prepaid amounted to $1,040.
3. Rent, rates and insurance are apportioned 3/4 to the factory and 1/4 to the offices.
4. Operating expenses are apportioned 2/3 to the factory and 1/3 to the offices.
5. Factory machinery, $18,000, was purchased on 1 October 20–5. No machinery was disposed of during the year. Factory machinery is being depreciated at 20% per annum on cost, from the date of purchase.
6. Office equipment is being depreciated at 15% per annum using the reducing balance method.
a. Prepare the manufacturing account for the year ended 31 March 20–6.
b. Prepare the income statement for the year ended 31 March 20–6.
c. Name the accounting principle Pierre is observing by valuing his inventories at the lower of cost and net realisable value.
d. Explain how Pierre is observing the principle of matching by making an adjustment for the prepaid rates and insurance.
e. Name the accounting principles Pierre is observing by depreciating his non-current assets.

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At 1 April 20-5 At 31 March 20-6 2$ Inventory -raw materials 30460 31850 work in progress 18020 17470 finished goods 62000 71060 Factory machinery at cost Provision for depreciation of factory machinery 154 000 ? 61600 Office equipment at cost 32000 ? Provision for depreciation of office equipment 8880 ? For the year ended 31 March 20-6: Revenue 1036500 Purchases of raw materials 364510 Purchases of finished goods 38 720 Carriage on purchases of raw materials 9430 Carriage on purchases of finished goods 1240 Rent, rates and insurance 28480 Operating expenses 33780 Wages - factory operatives 296770 factory supervisors 87400 office and sales staff 82 300