Kestrel has prepared a Trial Balance on 30 June 2022:

DR (£) CR(£) Revenue - , £ 55,000 Purchases £20,000, - Inventory at 1 July 2021 £8,000, - Rent expense £10,450, - Gas, electricity and insurance expense £6,000, - Wages and salaries £8,200, - Trade receivables £10,000 , - Trade payables - , £20,000 Cash at bank - , £8,100 Ordinary share capital - , 8,450 Bank loan, repayable 2025 - , £8,000 Land and buildings: cost £710,000 , - Land and buildings: accumulated depreciation at 1 July 2021 - , £10,00 Fixtures and fittings: cost £24,000 , - Fixtures and fittings: accumulated depreciation at 1 July 2021 - , £10,000 Retained earnings -, £612,000 Loan interest paid £400, - Allowance for trade receivables - , £500 TOTAL : 797,050 , 797,050 The following has yet to be accounted for: 

1. The interest rate on the loan is 10%.The trial balance reflects the interest paid in the year. 

2. Kestrel holds 3 different products in inventory on 30 June 2022. Product line The Novice The Proficient. The Expert £££ Cost £5,000 £4,000 £4,000 Selling price £6,000 £3,000 £6,000 Kestrel’s depreciation policy is as follows: Buildings straight line over 50 years Fixtures and fittings 20% reducing balance The cost of the land was £60,000. The building is estimated to have a residual value of £200,000. 

Fixtures and fittings are expected to have no resale value at the end of their useful life. 

4. Gas, electricity, and insurance expense reflects the cash paid during the year. This includes a payment of £1,680 made for the annual insurance premium on 30 April 2022. 

5. During the year, Kestrel conducted a review of the trade receivables: I. Receivable balances felt to be irrecoverable, £600 II. An allowance of 5% of trade receivables is to be maintained to cover doubtful debts and adjust for the 5 issues above to prepare: 

a) A Statement of profit or loss for the year ended 30 June 2022 

b) A Statement of financial position as of 30 June 2022 

Note: show clear workings, cross-referenced to the relevant entry in your financial statements. All numbers should be calculated to the nearest £ 

c) The directors at Kestrel do not understand the accounting for inventory. Provide a clear explanation of the rationale behind both the measurement and accounting for the inventory in adjustment 2.