SECTION A (COMPULSORY) Answer BOTH questions Question 1 (40 marks) Below is the trial balance of Primrose Ltd. as at 30" June 2020. DNIANIVDL A Sales 176,329 Purchases 109,725 Salaries 33,000 Insurance 2,160 Motor vehicles at cost 32,000 Accumulated depreciation (1st July 2019) 7,500 Fixtures and fittings 30,000 Accumulated depreciation (15t July 2019) 13,125 Inventory (15t July 2019) 13,524 Trade receivables 55,059 Allowance for trade receivables (15t July 2019) 271 Trade payables 27117 Accrued salaries (15! July 2019) 2,000 Capital (15t July 2019) 60,000 Prepaid insurance (15! July 2019) 1,485 Cash 60,303 Retained profit (1! July 2019) 10,914 Bank loans (8%) 40,000 337,256 337,256 Additional information: 1. During the year, some fixtures and fittings were disposed of. Its cost was 8,000 when originally acquired in January 2018. The proceeds from the disposal was 2,800. The disposal of the fixtures and fittings has not been accounted for. The fixtures and fittings are depreciated on a 25% reducing balance basis. Question 1 continued overleaf PTO Question 1 continued The company policy on all its non-current assets is to charge a full year depreciation in the year of purchase and none in the year of disposal. 2. Motor vehicles were bought on 15 November 2018. Their useful economic life is 4 years, and the residual value is 2,000. The straight-ine method is used to calculate the depreciation expense of these motor vehicles. 3. At the financial year end, trade receivables include a balance of 3,800 which is considered uncollectable. Given the current economic conditions, Primrose Ltd wishes to adjust the allowance for trade receivables to 4% of the trade receivables amount for the current financial year. 4. Salaries relating to June each year are paid in early July. Salaries for June 2020, amounting to 3,000 has not been accounted for. 5. Interest charges are paid annually in the first week of July. 6. The motor vehicle insurance paid during the year was 2,160. The insurance policy runs from 1% June 2020 to 315 May 2021. 7. The closing inventory was 13,675. This question ignores tax. Required: a) Prepare workings to show how to account for: i) The disposal of the fixtures and fittings (4 marks) iiy Depreciation charges for the non-current assets for the year (4 marks) iii) Accrued expenses (2 marks) iv) Prepayments (3 marks) v) The amount of allowance for trade receivables in the income statement and statement of financial position (3 marks) b) c) Using your workings from a) and the information provided in the question, prepare for Primrose Ltd: i) Income Statement for year ending 30 June 2020. (7 marks) ii) Statement of Financial Position as at 30 June 2020. (9 marks) Identify Primrose's form of business and outline its legal and financial reporting requirements. (8 marks) (Total 40 marks) PTO