Ben is an ex-regular soldier who retired from the army on 1 October 19_8 and started a car-hire firm with a gratuity of £2 500 and no other assets or liabilities.

On 30 September 19_1 he borrowed £20 000 from his brother-in-law so that he could expand his business. Just before the receipt of the money from his brother-in-law, Ben owned a fleet of cars valued at £35 000 and stocks of spares of £470. His customers owed him £1 860 and his bank balance was

£2 190. Deposits received in advance from prospective hirers amounted to

£250 and he owed £2 110 to various suppliers.

On 30 September 19_3 the Inland Revenue became aware of the existence of the business and required to be informed of the profits or losses from the date of Ben’s discharge from the army.

At 30 September 19_3 the fleet of cars was valued at £55 000 and stocks at

£2 100 while debtors stood at £5 630. There was a bank overdraft of £1 190, deposits of £350 and creditors of £6 300.

Ben has kept no books of account but estimates that his drawings from the business were £80 per week from 1 October 19_8 to 30 September 19_1 and £250 per week from 1 October 19_1 to 30 September 19_3.

Required:

(a) Calculate the apparent profit up to 30 September 19_1

(b) Calculate the profit or loss from 1 October 19_1 to 30 September 19_3

(c) State whether it would have made any difference if Ben claimed to have won £10 000 at a race-track during 19_2 and used it in the business.