Marvin (see previous case studies) celebrated two years in business on 30 June 2013. At that date, his versatile assistant, Chiquita, produced the following trial balance:

Case study Marvin’s second birthday Dr Cr

£ £

Appearance fees as entertainer 45,200 Cost of magician’s equipment 7,700 Cost of ‘saw the lady in half’ equipment 3,000 Bad debt 200 Purchases of novelties for resale 15,600 Sales of novelties 35,900 Marvin’s drawings 32,000 Wages to assistant (Chiquita) 24,600 Travel to performance venues 6,220 Cleaning 1,320 Loss on disposal of ‘disappearing lady’ apparatus 160 Opening inventory of novelties 2,400 Opening equity, 1 July 2012 18,300 Trade payables 480 Trade receivables 2,600 Bank balance 5,160 Depreciation on magician’s equipment, 1 July 2012 1,080 100,960 100,960 Notes:

1 At the very start of the year he closed down the manufacturing section, selling inventory of raw materials and machinery at their book values. There is no need to prepare a ‘cost of manufacturing’ section in the income statement.

2 Closing inventory of bought-in novelties at 30 June 2013 was £2,500.

3 Marvin owed £250 for dry-cleaning at 30 June 2013, but had paid £600 on 1 April 2013 for a rail season ticket lasting 12 months.
4 Depreciation for the year on the magician’s equipment was £1,300. The ‘saw the lady in half’ equipment is depreciated over four years, assuming a residual value of 20, of cost price.
5 A provision for doubtful debts is to be created of 5, of the closing trade receivables total.
Required Prepare Marvin’s income statement for the year ended 30 June 2013 and a statement of financial position as at that date.