Sister and Sledge are trading in partnership, sharing profits and losses in the ratio of 2:1, respectively. The partners are entitled to salaries of Sister £6,000 per annum and Sledge £5,000 per annum. There is the following additional information:

(1) Inventory as at 31 December 2012 was valued at £8,800.

(2) Staff salaries owing £290.

(3) Advertising paid in advance £200.

(4) Provision for the impairment of receivables to be increased to £720.

(5) Provision should be made for depreciation of 2% on land and buildings on cost, and for fixtures and fittings at 10% on cost.

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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Trial Balance as at 31 December 2012 Capital accounts: Sister 12,500 Sledge 5,000 Current accounts: Sister 1,500 Sledge 600 Drawings: Sister 9,800 Sledge 6,700 Long-term loan 40,250 Land and buildings at cost 164,850 Inventory as at 1 January 2012 9,500 Fixtures and fittings at cost 12,500 Purchases 126,000 Cash at bank 3,480 Revenue 305,400 Trade receivables 9,600 Carriage inwards Carriage outwards Staff salaries Trade payables 200 300 24,300 26,300