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Question 8 Mr. Mangotey separated from his employers, Excellent Breweries Itd on 31st December 2005 on voluntary redundancy and decided to use his terminal benefits as a venture capital to start a business of selling LG Generators of a standard type. He started the business with initial capital of 80,000 on January 1,2006. He arranged with Somotex to supply him with the generators at a unit price of 360. He decided to sell mainly on cash basis for 500. He however agreed to sell to friends and relatives on a monthly credit basis at the same price of 500. Effective 1st September 2006, Mr. Mangotey decided to introduce hire purchase sales to meet the request from prospective customers in formal employment. He required a deposit of 120 followed by 12 monthly installments of 40 each. All hire purchase sales are made in the first week of the month and the first installment is payable by the end of the month. During 2006, Mr Mangotey bought 600 generators from Somotex and sold 420 for cash and on normal monthly credit terms. Hire purchase sales were 10 in September, 24 in October, 40 in November and 50 in December but 4 of those sold in October were repossessed in December after deposit and one month installment had been paid in each case. Each of the repossessed generators were valued to have a net realizable value of 300. Mr. Mangotey, not being conversant with accounting treatment of hire purchase transactions, credited all sales to sales account and debited same to either cash book or debtors. The trial balance of Mr. Mangotey Enterprise as at 31st December 2006 was as follows: Required Prepare the income statement of Mr. Mangotey Enterprise for the year ended 31st December 2006 and balance sheet as at 31st December 2006