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Question: Business Transactions Grace Ltd is a book retailer specialised in accounting and business textbooks. The company reported the following statement of financial position: Grace Ltd balance sheet (statement of financial position) 31st December 2019 (in ) Shareholders' equity and Assets Liabilities Non-current assets: Building Equipment Accumulated depreciation Shareholders' equity: Share capital Retained profits 85,000 47,000 (22,200) 109,800 100,000 14,000 114,000 35,000 Current assets: Inventory (10,000 x 5) Accounts receivable Impairment (provision) for doubtful debts Cash 50,000 18,000 (1,000) 5,000 72,000 Liabilities Long-term liabilities: Loan payable Current liabilities: Accounts payable 32,800 67,800 Total Assets 181,800 Total Shareholders' equity and Liabilities 181,800 During 2020, the following transactions took place: 1. Purchases on credit of 5,000 books (inventory) for 8 each. Delivery costs of 2,000 are paid in cash. 2. Annual Insurance of 2,000 is pre-paid on 1st October. The insurance covers the next 12 months. 3. Sales on credit of 12,000 books for the price of 15 each. The company uses the weighted average cost (WAC) to value inventory outflows. 4. The analysis of accounts receivable revealed doubtful debts of 2,500. The impairment (provision) for doubtful debts reported in 2019 relates to the same customers. 5. The company agreed to pay extra hours to shop assistance that worked extra time. The amount agreed is 3,000 and will be paid in January 2021. 6. The estimated useful life for fixed assets is 50 years for the building and 5 years for the equipment. The company uses the straight-line method of depreciation. Required: a) Record the above transactions. You can use the pro-format table in Appendix 1, stating the names of the relevant accounts in the first row. b) Prepare the balance sheet and income statement for 31 December. You can use the formats in appendix (assume 20% corporate income tax) Liabilities Equity Assets Non-current Non-currer Non-current assets - Provison/ impairment assets - assets - acc. Accounts doubtful Deferred Building Equipm depreciat Inventory receivable debts expense Op Cash Accounts Payable Loan Accrued Share payable Expenses(*capital Retained profit Profit (1/S) 1 2 3 4 5 6 Grace Ltd balance sheet 31 December 2020 Assets Shareholders' equity and Liabilities Non-current assets: Building Equipment Accumulated depreciation Shareholders' equity: Share capital Retained profits Profit for the year Current assets: Inventory Accounts receivable Impairment (provision) for doubtful debts Deferred expense Cash Liabilities Long-term liabilities: Loan payable Current liabilities: Accounts payable Accrued expense Total Shareholders' equity and Liabilities Total Assets Grace Ltd Income Statement 2020 Sales revenues Cost of sales Gross profit Insurance expense Provision for doubtful debt Salary expense Depreciation expense Profit Tax expense Profit for the year