Beswick Limited manufactures mountain and road bikes. The trial balance at $31$ December $2020$ was as follows:

Dr $$ Cr $$

Revenue $3,564,300$

Purchases $1,578,250$

Inventory on $31/12/19120,500$

Production expenses $805,230$

Administrative expenses $151,530$

Distribution expenses $214,250$

Wages $500,400$

Loan interest $11,000$

Equipment at cost $1,100,000$

Motor vehicles at cost $256,000$

Accumulated depreciation:

Office equipment $31/12/19$

Motor vehicles $31/12/19$

$320,000$

$90,400$

Trade receivables $219,500$

Allowance for irrecoverable debts $2,500$

Discounts allowed$/$received $3,4003,780$

Trade payables $130,400$

Bank $80,770$

Share capital $500,000$

Retained earnings $129,450$

Bank loan $($repayable $2050)300,000$

$5,040,8305,040,830$

$$

Notes

i$)$ Beswick provides for depreciation on equipment at $20\%$ on a reducing balance

basis. This should be recorded in production expenses.

ii$)$ The motor vehicles were bought two years ago. The residual value is $30,000$ and depreciation is charged at $20\%$ on a straight line basis. This should be recorded in distribution expenses.

iii$)$ Beswick has decided that the doubtful debt provision should be set at $2\%$ of the value of the trade receivables at the year end.

iv$)$ Additional storage space relating for the year ended $31$ December $2020$ are

estimated at $5,000.$ No bill has yet been received. Costs should be recorded in administration expenses

$($v$)$ Inventory at $31$ December $2020$ is valued at $145,240$

Required:

$($a$)$ Prepare the journals to record the adjustments needed for items $($i$)$ to $($v$)$ above.

$(10$ marks$)$

$($b$)$ Prepare the Income Statement for the year ended $31$ December $2020.$

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