A On 1 January 2012, F Limited commenced business selling goods on hire purchase. Under the terms of the agreements, an initial deposit of $20 \%$ is payable on delivery, followed by four equal quarterly instalments, the first being due three months after the date of sale. During the year sales were made as follows:

\begin{tabular}{ccc}

& Cost price & HP sales price \\

\hline & $£$ & $£$ \\

10 January & 150 & 225 \\

8 March & 350 & 525 \\

12 May & 90 & 135 \\

6 July & 200 & 300 \\

20 September & 70 & 105 \\

15 October & 190 & 285 \\

21 November & 160 & 240

\end{tabular}

The goods sold in July were returned in September and eventually sold in November for $£ 187$ cash. All other instalments are paid on the due dates.

It may be assumed that:

(a) gross profit and interest are credited to profit and loss in the proportion that deposits and instalments received bear to hire purchase price; or

(b) the cost is deemed to be paid in full before any credit is taken for gross profit and interest.

You are to prepare for the first year of trading, an extract of the hire purchase income statement showing gross profit compiled firstly on assumption

(a) and secondly on assumption

(b) and give the relevant statement of financial position entries under each assumption.

Workings should be clearly shown.