I Part 1 - Answer the following question Question 1 (40 marks) A-Tracy Underhill operates as a sole trader. Below is a trial balance extracted from her books as at 31 December 2017 Trial balance for Tracy Underhill as at 31 December 2017 Debit Credit f Sales revenue 695,000 Inventory (as at 1 January 2017) 105,800 Purchases 625,200 Non-current assets at cost. Equipment 100,000 Motor vehicle 80,000 Accumulated depreciation: Equipment 10,000 Motor vehicle 10,000 Insurance 14,700 Rent 30,000 Heating and lighting 10,000 Salaries and wages 40,000 15,300 Miscellaneous expenses 28,500 Receivables 110,000 Allowance for receivables 14,000 Payables 101,500 Cash 71,000 Bank loan 100,000 Capital 300,000 Total 1.230,500 1.230,500 Additional information is provided for use in preparing the company's adjustments: 1 The value of closing inventory is 102,500. 2 Interest is payable on the bank loan at eight per cent per annum. The annual amount due as at 31 December 2017 had not yet been paid. 3 Tracy has paid her rent until 31 March 2018. Her annual rent is 24,000 4 Office equipment has a useful life of ten years and a residual value of 0. It is to be depreciated on a straight-line basis 5 The motor vehicle with a useful life of ten years and an estimated residual value of 30,000 is to be depreciated on a straight-line basis at a rate of 10% 6 Tracy finds that receivables of 10,000 need to be written off as irrecoverable. 7 The allowance for receivables is to be set at ten per cent of the remaining outstanding receivables as at 31 December 2017 8 The heating bill will arrive on January and about 1,000 is expected to relate to the period until 31 December B124/ THE Final (V1) Page 2 of 5 Summer 2019/2020 Motor expenses Reguire ilings Review View Help Acrobat Search 12 3.1.4.5.6.7. Avvvv Motor vehicle 80,000 Accumulated depreciation: Equipment 10,000 Motor vehicle 10,000 Insurance 14,700 Rent 30,000 Heating and lighting 10,000 Salaries and wages 40,000 Motor expenses 15,300 Miscellaneous expenses 28,500 Receivables 110,000 Allowance for receivables 14,000 Payables 00 Cash 71,000 Bank loan 100,000 Capital 300,000 Total 1.230.500 1.230,500 Additional information is provided for use in preparing the company's adjustments: 1 The value of closing inventory is 102,500. 2 Interest is payable on the bank loan at eight per cent per annum. The annual amount due as at 31 December 2017 had not yet been paid. 3 Tracy has paid her rent until 31 March 2018. Her annual rent is 24,000. 4 Office equipment has a useful life of ten years and a residual value of 0. It is to be depreciated on a straight line basis. 5 The motor vehicle with a useful life of ten years and an estimated residual value of 30,000 is to be depreciated on a straight-line basis at a rate of 10% 6 Tracy finds that receivables of 10,000 need to be written off as irrecoverable. 7 The allowance for receivables is to be set at ten per cent of the remlining outstanding receivables as at 31 December 2017 8 The heating bill will arrive on 5 January and about 1,000 is expected to relate to the period until 31 December B124/ THE Final (VI) Page 2 of 5 Summer 2019 2020 I Required: 1) Make the end of period adjustments entries (11 Marks 2) Prepare Tracy's income statement for the year ended December 31, 2017 (9 Marks) 3) Prepare Tracy's balance sheet as at December 31, 2017 (10 Mura B. What will be the effect on financial statements if an accrued expense is not recorded at the end of the year? On June 30 of the current calendar year, Apricot Co pud 59,500 cash for management services to be performed over a two-year period. Apricot follows a policy of recording all prepaid expenses to expense accounts at the time of cash payment Retired 1. Prepare the adjusting entry on December 31 for Apricot Co. 2- Show the effect of the adjusting entry on Income statement and balance sheet at the end of the Current calendar yen