Mrs. Simla, a sole trader, has provided the following trial balance extracted from the books on 31 December 2021: Rs (Dr) Rs(Cr) Land and buildings 220,400 Accumulated depreciation on land and buildings 88,160 Equipment 104,700 Accumulated depreciation on equipment 38,900 Motor vehicles 71,740 Accumulated depreciation on motor vehicles 51,390 Inventory as at 1/1/2021 41,010 Receivables 98,170 Payables 51,240 Bank and cash 25,500 Tax liability 9,800 Prepayments 410 Sales and purchases 407,300 574,950 Returns outwards and returns inwards 6,770 7,010 Discounts 2,100 3,520 Carriage inwards 790 Light and heat 8,790 Telephone and internet 6,020 Business insurance 17,420 Rates and water charges 9,320 Wages and salaries 104,575 Long term bank loan 87,500 Long term loan interest 5,280 Irrecoverable debts 950 Drawings 18,090 Accumulated profits/losses 62,100 Capital 174,765 1,149,335 1,149,335 The following information, which has not been accounted for above, is also available:

 i) Inventory as of 31 December 2021 showed the following information. Based on this information the value of closing inventory to be incorporated into the financial statements must be calculated. Product Quantity Cost per unit Sales Price per unit Costs to Sell per unit in Units Rs Rs Rs X 1,160 4.15 5.15 0.40 Y 5,480 2.70 2.65 - Z 7,320 1.85 1.90 0.10

ii) On 31 December 2021 Mrs. Simla paid Rs1,150 for her personal house insurance out of the business bank account funds. No part of the house is used in the business.

iii) On 31 December 2021 Mrs. Simla paid Rs5,000 for the tax to the Mauritius Revenue Authority. 

iv) On 31 December 2021 Mrs. Simla introduced Rs50,000 as capital to boost the expansion in 2022. These funds were deposited in the firm bank account. 

v) On 30 June 2021 a motor vehicle was sold. The motor vehicle was purchased for Rs45,000 and had accumulated depreciation of Rs30,375 as at 1 January 2021. Rs15,500 was received for the sale of the motor vehicle. (See additional information below for depreciation policy) 

vi) Allowance to be made for depreciation as follows:

 ● Land and buildings 2% straight line

 ● Equipment 10% reducing balance 

● Motor vehicles 15% straight line 

● The depreciation policy is to charge depreciation on a monthly basis from the month of purchase to the month of sale/disposal. 

Required: Prepare the Income Statement for the year ended 31 December 2021 and the Statement of Financial Position as of that date.

Answer rating: 100% (QA)

Income statement for the year ended 31 December 2021 Revenue Sales Rs407300 Less Returns Rs6770 Net ... View the full answer