Below is the trial balance of Barney Flames.

Barney Flames Trial balance at 31 December 2022

Trading account: Sales 1,000,000

Opening inventory 200,000

Purchases 350,000

Other revenue and expenses: Income from other services 2,000

Rent 30,000 Heating and lighting 5,500

Advertising expense 25,000

Wages 100,000

Motor expenses 15,500

Discounts allowed 3,550

Balance sheet accounts: Motor vehicles at cost 70,000

Motor vehicles - accumulated depreciation 10,000

Equipment at cost 60,000

Equipment - accumulated depreciation 10,000

Receivables 200,080

Allowance for receivables 30,000

Bank 50,000

VAT liability 20,000

Payables 20,300

Loan 7,000

Capital 60,330

Drawings 50,000 1,159,630 1,159,630

The following information is relevant for end of period adjustments.

1. Closing inventory at 31 December 2022 was 100,000.

2. Depreciation on the motor vehicle is to be provided at 20% per annum on the reducing balance method.

3. Depreciation on equipment is to be provided at 15% per annum on the straight-line basis, assuming no residual value.

4. Barney Flames estimates that 10,000 due from customers will be irrecoverable and must be written off.

5. The allowance for receivables is to be set at 10% of net receivables at 31 December 2022. 6. Rent expense includes a prepayment of 5,000.

7. The heating bill will arrive in the first week of January 2023 and about 1,500 is expected to relate to the year ended 31 December 2022.

8. Advertising includes a payment of 5,400 made on 1 November 2022 relating to the three months to 31 January 2023. 9. The long-term loan is repayable in 5 years time. Interest payable on the loan is 12% and will be paid once per year.

Required: (a) Prepare the income statement for Barney Flames for the year ended 31 December 2022. The income statement must show all amounts in whole pounds (). Remember to clearly show all your workings. (22 marks)

(b) Prepare the balance sheet for Barney Flames at 31 December 2022. The balance sheet must show all amounts in whole pounds (). Remember to clearly show all your workings