1 Mr. Rahman started a business selling readymade garments on 1 March 2021. After the first six months of his business, he was asked by tax officials to pay tax on the net income that he made during the first six months. He had a course on accounting when he studied in university long ago and based on his limited knowledge he prepared the following financial statements that he wanted to submit to the Income Tax Department. Income statements for six months ended 31 Balance Sheet as at 31 August 2021 August 2021 Sales 300000 Assets: Less: Cost of goods sold 130000 Equipment 150000 Gross profit 170000 Furniture and fixtures 30000 Less: Operating expenses Accounts receivables 12000 Rent expense 30000 Cash and bank 40000 Salaries expense 45000 232000 Utility expense 10000 Equity: Drawing 24000 Capital 140000 Inventory 22000 Net income 27000 Freight out 12000 167000 143000 Liabilities: Net Income 27000 Accounts payable 15000 10% Loan 50000 65000 232000 Mr. Rahman was not confident enough about the profit that he calculated for the first six months of his business. He also heard about Generally Accepted Accounting Principles (GAAP) that he should follow while preparing financial statements in order to properly assess the performance of his business. For this reason, he asked your help to review the above financial statements. After a careful review, you have found the following adjustments that would be required to amend the above financial statements. (i) Actual amount of inventory on 31 August was $24,000. (ii) Rent expense included $3000 which was paid in advance for the month of September (iii) Outstanding salaries was $4000 at the end of August. (iv) Annual depreciation of 20,000 for equipment and 4000 for furniture was not considered. (v) Loan was taken on 1 May 2021. Interest of 10% would be due in the following year. a) Prepare the amended income statement for the six months ended 31 August 2021. b) Prepare an amended classified balance sheet as at 31 August 2021. c) Explain any two accounting principles which you think are important to take the above adjustments into consideration while preparing financial statements.