Cute Kids is a retail outlet that sells childrens clothing to the public.

Cute Kids are not registered as a Vat vendor and utilise the perpetual inventory method to keep records of the trade goods and the Asset method to account for consumable material.

The following is the pre-adjustment trial balance at 31 December 2018

	Debit	Credit
Land and buildings	437 500
Equipment	185 000
Accumulated depreciation: Equipment		66 600
Inventory -Merchandise	103 060
-packing material	21 740
Debtors control	158 000
Fixed deposit	90 000
bank	42 500
Capital- K Mini		446 600
Drawings	32 500
Mortgage bond (8%)		125 000
Creditors control		115 000
sales		1 360 000
Cost of sales	710 000
Interest income		2 100
Rent income		6 000
Advertising	24 500
Interest on mortgage bond	7 500
Credit losses/bad debts	6 500
Administration expenses	75 000
rates	22 500
Telephone	6 000
Salaries and wages	175 000
Security fees	24 000
Total	2 121 300	2 121 300

Additional information

1. A physical stock-take on 31 December 2018 revealed that inventory was valued as follows

• Merchandise R 106 360
• Packing material R 2 340

2. K Mini invested R 90 000 into a 3 year fixed deposit paying interested at 7% per year.

The investment was made on 1 December 2017.

3. Salaries due but not yet paid at 31 December 2018 was R 5 170
4. F. Asif entered into a rental agreement with K Mini to utilise a part of the premises to open a cell phone repair shop from 1 September 2018. The lease agreement is for a period of 1 year with an option to extend. Asif made an eft payment for the first 6 months rent. Asif is the only tenant in the building.
5. Interest on the mortgage is payable quarterly in arrears at 8 % per year. The loan was negotiated on the 31 March 2018. No repayment of the capital amount was made during the year.
6. Create an allowance for credit losses equal to 5% of outstanding debtors.
7. Rates include R 6 500 paid for the period 1 January 2018 to 30 June 2018. The balance was paid for the period 1 July 2018 to 30 June 2018. Make the adjustment to the rates account.
8. An amount of R 4000 paid for the administration expenses was erroneously allocated to the advertising account.
9. The December 2018 telephone account of R 800 was received on the 31 December but was paid and recorded in the CPJ on the 23 January 2019.
10. The December 2018 security fees have not been paid and needs to be recorded. On 1 July 2018 the monthly rent was increased by 20%.
11. Provide for depreciation of equipment at 20% per year on the reducing balance method. There were no purchases or sales of equipment during the year.

Required

1. Prepare the statement of profit and loss and other comprehensive income for Cute Kids for the year ended 31 December 2018.
2. Prepare a statement of changes in equity for the year ended 31 December 2018.