The following is the balance sheet of WW Associates as at 31 December 2005:

During 2006, the following transactions took place:
1 The owners withdrew capital in the form of cash of £23,000.
2 Premises were rented at an annual rental of £20,000. During the year, rent of £25,000 was paid to the owner of the premises.
3 Rates on the premises were paid during the year for the period 1 April 2006 to 31 March 2007 and amounted to £2,000.
4 Some machinery (a non-current asset), which was bought on 1 January 2005 for £13,000, has proved to be unsatisfactory. It was part-exchanged for some new machinery on 1 January 2006, and WW Associates paid a cash amount of £6,000. The new machinery would have cost £15,000 had the business bought it without the trade-in.
5 Wages totalling £23,800 were paid during the year. At the end of the year, the business owed £860 of wages.
6 Electricity bills for the four quarters of the year were paid totalling £2,700.
7 Inventories totalling £143,000 were bought on credit.
8 Inventories totalling £12,000 were bought for cash.
9 Sales revenue on credit totalled £211,000 (cost £127,000).
10 Cash sales revenue totalled £42,000 (cost £25,000).
11 Receipts from trade receivables totalled £198,000.
12 Payments to trade payables totalled £156,000.
13 Van running expenses paid totalled £17,500.
The business uses the reducing-balance method of depreciation for non-current assets at the rate of 30 per cent each year.
Required:
Prepare a balance sheet as at 31 December 2006 and an income statement (profit and loss

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Balance sheet as at 31 December 2005 Non-current assets Machinery 25,300 Current assets Inventories 12,200 Trade receivables 21,300 Prepaid expenses (rates) 400 Cash 8,300 42,200 Total assets 67,500 Capital Original 25,000 Retained profit 23,900 48,900 Current liabilities Trade payables 16,900 Accrued expenses (wages) 1,700 18,600 Total equity and liabilities 67,500