General Green Productions Ltd has an authorized share of 1,125,000 $1 ordinary shares. On December 31, 2015, the following Trial Balance was extracted from the company’s books:

Trial Balance

Details/Accounts	Dr $	Dr $
Leasehold land and buildings	982,500
Provision for depreciation		491,250
Sales		4,207,800
Debtors	851,250
Selling expenses	246,420
Motor vehicles	159,750
Accumulated depreciation		96,300
Cash and bank	1,476,150
Purchases	2,737,950
Ordinary shares fully paid up		750,000
Other reserves		1,050,000
Inventory, January 1, 2015	159,600
Plant and machinery	816,000
Provision for depreciation		454,350
Wages	294,540
Creditors		591,000
Administrative expenses	335,880
Profit and loss account		438,690
Interim dividend paid	37,500
Provision for bad & doubtful debts	------------	18,150
Total	8,097,540	8,097,540

Additional information:

1. Provision for bad and doubtful debts is to be adjusted to $15,000.
2. Inventory on December 31, 2015, was $170,000.
3. The directors have decided to transfer $130,000 to general reserve and have proposed a final dividend of 5%.
4. An amount of $10,000 was owed for insurance on December 31, 2015, while wages paid to an employee for $28,000 covers a 14 month period to February 28, 2016.
5. Provision is to be made for:
6. Legal fees $20,000.
7. Depreciation to be charged as follows: plant & machinery 10% reducing balance; motor vehicles 20% straight line; and leasehold land and buildings 5% on costs.
8. The company has to settle a legal claim for $100,000 in respect of damages against a customer. The company’s legal team has advised for the acceptance of the claim.

a) Prepare a Trading and Profit and Loss Account for the period ending December 31, 2015.

b) Prepare a Balance Sheet as of December 31, 2015.

c) Explain and justify your treatment of the legal claim.