Self-test Hasta is an antique dealer operating from rented premises. He keeps few accounting records. All his sales and purchases are for cash, except for some sales to other dealers which are made on credit.

The following information is available to prepare his income statement for the year ended 31 December 2006.

Assets and liabilities $ As at 31 December 2005 2006 Equipment 1,200 2,000 Inventory 85,000 88,500 Trade receivables 4,800 6,400 Payable for expenses 1,100 1,400 Hasta keeps cash that is in hand at the end of each week as drawings, subject to the retention of the float. No record has been made of payments for purchases of goods for sale. He fixes his selling price for all items by doubling their cost. He allowed a trade discount of $9,000, representing 30% on selling price, for sales to dealers with a normal price of $30,000. ($30,000 less $9,000 discount = $21,000).

All the equipment held at the beginning of the year was sold for $700, and new equipment purchased for $2,000.
A full year’s depreciation is to be charged on the new equipment at 20%, with no depreciation on the items sold.
Required:

(a) Prepare Hasta’s income statement for the year ended 31 December 2006.
Your answer should include a detailed calculation of cost of sales.

(b) Calculate Hasta’s drawings for the year ended 31 December 2006.
(ACCA Preparing Financial Statements (International Stream) June 2007)