2 Part C Farhana Corporation was formed some years ago. The company's share capital consists entirely of ordinary shares. The financial year of Farhana Corporation ends on 31 December. The company provided the following balances from its books of account at 31 December 2021. Debit Credit RM Purchases and Sales Returns Carriage Discounts Commission received Insurance Rates 100,000 RM 370,000 10,000 20,000 3,000 1,000 2,000 4,000 20,000 5,000 Operating expenses 17,000 Salaries 55,000 Selling and distribution expenses 6,000 Bank interest 4,000 Directors' fees 60,000 Fixtures and Fittings - cost 50,000 Fixtures and Fittings - provision for depreciation 10,000 Office equipment - cost 60,000 Office equipment - provision for depreciation 18,000 Motor Vehicles -- cost 180,000 Motor vehicles-provision for depreciation 20,000 Trade payables and receivables 30,000 16,000 Allowance for doubtful debts 2,000 Bank overdraft 8,000 5% loan notes 150,000 100,000 ordinary share capital at RM0.50 each 50,000 Retained profit 8,000 General reserves 2,000 Dividends paid during the year ended 31 December 2021 9,000 Inventory 1 January 2021 70,000 TOTAL 680,000 680,000 Continued... Additional information at 31 December 2021: 1) Inventory at 31 December 2021 was valued at RM38,000. 2) The carriage consists of RM1,000 carriage inwards and RM2,000 carriage outwards. 3) The annual insurance premium is RM16,000. On 31 December 2021 insurance was paid to cover the period from 1 January 2022 to 31 March 2022. There was no accrual or prepayment of insurance at 1 January 2021. 4) Rates of RM5,000 were paid during the year to 31 December 2021. This payment covered the period 1 January 2021 to 31 October 2021 only. From 1 November 2021 Annual rates were RM6,000. 5) Depreciation is to be charged on all non-current assets owned at the end of the year as follows: Fixtures and fittings Office equipment Motor vehicles 20% per annum using the straight-line method 15% per annum using the straight-line method 25% per annum using the reducing balance method 6) One of the company clients has become bankrupt. The client owed RM2,000. The company does not expect to recover this amount. 7) The provision for doubtful debts is to be maintained at 5%. 8) Loan notes interest was accrued at the end of financial year. 9) Corporate tax payable was 20% on the company profit. 10) On 31 December 2021 it was decided to make a transfer to general reserve of RM3,000. 11) A final dividend of RM8,000 was proposed on 31 December 2021. REQUIRED a) Prepare the statement of profit or loss for the year ending 31 December 2021. (18 marks) b) Prepared the statement of changes in equity for the year ending 31 December 2021. (5 marks) c) The directors of Farhana Corporation want to expand the company and need to raise RM100,000. They are considering issuing either 6% preference shares or 5% loan notes. i) State TWO features of preference shares ii) State TWO features of loan notes (2 marks)