Wayne has been in business for many years. His accountant has extracted the following trial balance from his books of account as at 31 March 2005:

£ £

Bank 1200 Capital 33000 Cash 300 Drawings 6000 Insurance 2000 Office expenses 15000 Office furniture at cost 5000 Office furniture: accumulated depreciation at 1 April 2004 2000 Provision for bad and doubtful debts at 1 April 2004 500 Purchases 55000 Salaries 25000 Sales 100000 Stock at 1 April 2004 10000 Trade creditors 4000 Trade debtors 20000

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139500 139500

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Notes: The following additional information is to be taken into account:

1 Stock at 31 March 2005 was valued at £15 000.

2 The insurance included £500 worth of cover which related to the year to 31 March 2006.

3 Depreciation is charged on office furniture at 10 per cent per annum of its original cost (it is assumed not to have any residual value).

4 A bad debt of £1000 included in the trade debtors balance of £20 000 is to be written off.

5 The provision for bad and doubtful debts is to be maintained at a level of 5 per cent of outstanding trade debtors as at 31 March 2005, i.e. after excluding the bad debt referred to in note 4 above.

6 At 31 March 2005, there was an amount owing for salaries of £1000.

Required:

(a) Prepare Wayne’s trading and profit and loss account for the year to 31 March 2005; and

(b) prepare a balance sheet as at that date.