A- Farah Youssef operates as a sole trader. Below is a trial balance extracted from her books as at 31 December 2020.

Trial balance for Farah Youssef as at 31 December 2020

Debit

Credit

_ .

Sales revenue

695,000

Inventory (as at 1 January 2020)

105,800

Purchases

625,200

Non-current assets at cost:

Equipment

100,000

Motor vehicle

80,000

Accumulated depreciation:

Equipment

10,000

Motor vehicle

10,000

Insurance

14,700

Rent

30,000

Heating and lighting

10,000

Salaries and wages

40,000

Motor expenses

15,300

Miscellaneous expenses

28,500

Receivables

110,000

Allowance for receivables

4,000

Payables

101,500

Cash

71,000

Bank loan

100,000

Capital

310,000

Total

1,230,500

1,230,500

Additional information is provided for use in preparing the company's adjustments:

1The value of closing inventory is 102,500.

2On December 1, Farah Company borrowed 100,000, at 6% annual interest, from the National Bank. Farah Company has 120 days before the first payment is required.

3Farah has paid her rent until 31 March 2021. Her annual rent is 24,000.

4Office equipment has a useful life of ten years and a residual value of 0. It is to be depreciated on a straight-line basis.

5The motor vehicle with a useful life of ten years and an estimated residual value of 30,000 is to be depreciated on a straight-line basis at a rate of 10%.

6Farah finds that receivables of 10,000 need to be written off as irrecoverable.

7The allowance for receivables is to be set at ten per cent of the remaining outstanding receivables as at 31 December 2020.

8The heating bill will arrive on 5 January and about 1,000 is expected to relate to the period until 31 December.

Required:

1.Make the end-of-period adjustments entries.(7.2 Marks)

2.Prepare Farah's income statement for the year ended December 31, 2020.(7 Marks)

3.Prepare Farah's balance sheet as at December 31, 2020.(6.8 Marks)