Please do either the journal entry for the following or the income statement & balance sheet.
Question 1 The following is the extracted balances as at 31 December 2020 of Buffalo Limited. Bank overdraft CL Cash in hand Share capital: 600,000 ordinary shares of 10c each E : 40,000 6% cumulative $1 preference shares NCA General reserve Share premium Provision for doubtful debts Retained profits at 1.1.2020 5% Debentures Interim dividend paid on ordinary shares Interim dividend paid on preference shares Freehold land, at cost Buildings at cost Buildings: accumulated depreciation at 1.1.2020 Administrative expenses Bad debts expense Purchases /Sales Sales expenses Equipments at cost Equipments: accumulated depreciation at 1.1.2020 Stocks at cost at 1.1.2020 Trade creditors Trade debtors Debenture interest expense 18,000 200 60,000 40,000 30,000 3,000 2,500 51,200 48,000 4,800 1,200 54,000 114,000 18,000 41,600 1,100 89,200 240,000 6,100 66,000 30,000 42,200 18,900 138,000 1,200 The following information is available. i. Stocks at 31 December 2020 cost $45,000. Included in the stocks are items which cost $1,400 which are now obsolete and are expected to be sold for $400. ii. Depreciation on fixed assets is to be charged as follows: Freehold land: no depreciation is charged Buildings: 2% per annum on a straight-line basis Equipments: 25% per annum on a reducing balance basis Full year depreciation is charged in the year of acquisition but no depreciation is charged in the year of disposal. iii. At 31 December 2020, the freehold land has been valued at $200,000. The directors wish the valuation of the land to be incorporated into the accounts. iv. An item of equipment was disposed of during the year for $1,000. It was purchased in 2008 for $3000. The sale proceeds were credited to the sales account. No other entries relating to the disposal, other than sales proceeds, have been made. V. A customer who owes $4,000 has gone bankrupt after 31 December 2020. The company wishes write this off as a bad debt and provide 5% of the remaining trade debtors. A page of the purchases day book has been overcastted by $500. No adjustments have been made in the relevant ledgers vi. vii. Goods with an original purchase price of $1,500 were returned to suppliers on 29 December 2020. This has not been recorded. However the stock has been excluded from the stock take on 31 December 2020. viii. The dividend on the cumulative preference shares, due to be paid on 1 January 2021, is to be provided. ix. Corporation tax of $20,000 on the current year's profits and audit fee of $5,000 are to be provided. Required: Prepare an income statement for the year ended 31 December 2020 and a balance sheet at that date together with the changes in equity for the directors. (25 marks)
