Joe Durango prepared the following trial balance from the accounting records of his firm, Dango Traders.

Durango Traders Trial BalanceSheet

As at 31^stJuly 2019

Dr

Cr

Sales

675,000

Sales return and allowances

2,250

Purchases

436,500

Purchase returns and allowance

3,150

Freight in

11,700

Advertisement

2,250

Salaries

52,200

Administrative expenses

3,150

Stationery and printing

4,050

Office equipment at cost

27,000

Accumulated depreciation office equipment

10,125

Capital: J. Durango 1/8/2018

49,500

Drawings: J Durango

45,000

Cash

78,225

Trade Debtors

10,350

Trading Inventory 1/8/2018

70,650

Prepaid Insurance

1,620

Prepaid rental

10,800

Trade Creditors

18,000

755,755

755,755

Additional Information

i.The enterprise took out a fire insurance policy on 1^stApril, 2019 and paid a premium of Kshs. 1,620 for the 12 months to 31^stMarch, 2020.

ii.On 1^stFebruary 2019, Durango Traders enteredinto a rental contract and paid a year's rental (Kshs. 10,800) in advance

iii.Depressionof Kshs. 3,375 must still be provided for the year ended 31^stJuly 2019 on office furniture

iv.On 31^stJuly 2019, the trading inventory amounted to Kshs. 59,400 (at cost price)

REQUIRED:-

a)Draw journal entries to give effect to the adjustment at the year end. Justify your answer by reference to the accounting principles and concepts

b)Draw the Income Statement for the enterprise for the year ended 31^stJuly, 2019

Draw a balance sheet of the business at 31^stJuly 2019