Ali trades as a sole proprietor. He maintains his own accounting records and has asked for your help and advice in preparing Financial Statements for the year ended 31 December 2018. He had prepared the following list of balances: Balances as at 31st Dec 2018 (unless stated) Inventory Brought Forward (at 1st Jan 2018) Purchases Revenue Interest Salaries and Wages Insurance Light and Heat 26,500 189,000 310,000 4,500 32,500 1,900 5,600 Other Expenses 13,400 Bad debts 250 Premises - cost 160,000 Premises - accumulated depreciation (1st Jan 2018) 25,600 Motor vehicles-cost 33,000 Motor vehicles-accumulated depreciation (1st Jan 2018) 11,880 Fixtures and fittings - cost (acquired 1st April 2018) 15,700 Trade Receivables 37,600 Prepayments (1st Jan 2018) 400 Trade Payables Accruals (1st Jan 2018) 21,500 820 Cash at Bank 3,100 Bank Loan 100,000 Drawings in the year ended 31st Dec 2018 Equity (1st Jan 2018) 45,000 98,650 568,450 568,450 Notes 1) During the year a motor vehicle was disposed of. It cost 16,000 when originally acquired on 1st April 2016. Ali was not sure how to deal with the disposal, and has included the receipt from the disposal of 8,000 in Revenue. No other adjustments have been made to record this transaction (see Note 2 for depreciation policies). Question 1 continued 2) Depreciation is accounted for in accordance with the following policy: BMAN10621A a. The policy on all non-current assets is to charge a full year's depreciation in the year of purchase and none in the year of disposal. b. Premises are depreciated on a straight line basis over 50 years with no residual value. c. Motor Vehicles are depreciated on a reducing balance basis, at a rate of 20%. d. The fixtures and fittings acquired during the year will be depreciated on a 25% straight line basis, after which they are expected to have a residual value of 3,500. 3) The brought forward accruals figure in the list of balances comprises 820 for Light and Heat. Light and Heat bills are received quarterly. You can assume usage is at a steady rate over the quarter. The latest bill received of 1,080 for the quarter ending January 2019 was paid in full on 1st February 2019. 4) The loan was issued on 1 January 2015 and is repayable in full on 31 December 2021. Interest on the Loan is charged every quarter. The interest rate is 6% per annum. 5) The brought forward prepayments figure in the trial balance relates to insurance. Insurance is paid in one amount on 1st April every year. This year the business paid 1,900 for insurance to 31st March 2019. 6) In addition to the 250 Bad debts already written off during the year, Ali has reviewed the Trade Receivables outstanding at the year end and considers one customer who owes 680 is now a bad debt. Ali also considers a general provision for doubtful debts for 3% of the remaining trade receivables is also required. 7) Ali took inventory for personal use which had cost the business 2,100 when bought. 8) A stock-take at the end of the year valued Inventory at 31,600 at 31 December 2018. Required: Question 1 continued overleaf a) Prepare for Ali, including all workings: Page 2 of 6 i. A Statement of Financial Position as at 31 December 2018 (24 marks) ii. An Income Statement for the year ending 31 December 2018 (12 marks)