Question 1 (30 marks)

This tutor-marked assignment (TMA 01) must be submitted by 12 noon (UK local time) on the date shown on the study planner on the module website.

This question assesses Week 1: Review of preparing sole trader financial statements.

Grogu Djarin owns a sole trader business selling spectacular magic tricks. Grogu also gives performances as a magician. On 31 October 2021, he extracted the following trial balance.

Grogu Djarin
Trial balance at 31 October 2021
Trading account:
Sales			888,888
Opening inventory	289,250
Purchases	452,750
Other revenue and expenses:
Performance income			88,888
Rent	29,800
Heating and lighting	4,300
Advertising expenses	22,000
Wages	47,476
Motor expenses	20,500
Discounts allowed	2,000
Balance sheet accounts:
Motor vehicle at cost	60,000
Motor vehicle accumulated depreciation			12,000
Equipment at cost	200,000
Equipment accumulated depreciation			100,000
Receivables	89,700
Allowance for receivables			8,000
Bank	34,000
VAT liability			44,000
Payables			40,000
Loan			50,000
Capital			180,000
Drawings	160,000
Total	Total1,411,776		Total1,411,776

The following information is relevant:

1. The closing inventory on 31 October 2021 was valued at 325,100.
2. Grogu gave a performance on 20 October 2021 for which he has not yet received payment. He expects to be paid 8,889.
3. Grogu depreciates his motor vehicle on a reducing balance basis by 20% per annum.
4. Grogu depreciates his equipment on a straight-line basis by 10% per annum.
5. Grogu expects that 8,250 due from customers will be irrecoverable and must be written off.
6. The allowance for irrecoverable receivables is to be set at 8% of net receivables at the year-end.
7. On 1 September 2021 Grogu had paid 9,000 of rent for the three-month period until 30 November 2021.
8. On 1 August Grogu had paid 8,000 for advertising for the four-month period until 30 November 2021.
9. Grogu estimates that an accrual for heating and lighting expenses of 1,200 is required.
10. The long-term loan is repayable in 10 years time. Interest payable on the loan is 8% and will be paid once a year.

Required

• a.Prepare Grogu Djarin's income statement for the year ended 31 October 2021. Remember to clearly show all your workings.
• b.Prepare Grogu Djarin's balance sheet as at 31 October 2021. Remember to clearly show all your workings.