Practice question on the income statement and balance sheet Sunshine Ltd. started business on 1 January 2019.The following transactions occurred during the first year: 1. On 1 January, the founder of Sunshine Ltd., Joan Summer, made a cash contribution of 200,000. 2. On 1 January, Sunshine Ltd. borrows 21,000 loan from bank for 3 years, with annual interest rate of 5%. Sunshine Ltd pays interest on 31 December each year. 3. Premises were rented from 1 January at an annual rental of 20,000. During the year, rent of 25,000 was paid to the owners of the premises. 4. A delivery van was bought on 1 January for 17,000 (useful life 4 years; straight-line depreciation; residual value 1,000 ). 5. On 1 January, equipment was acquired for 30,000. A payment of 15,000 was made the same day. 5,000 will be paid by January 2020. (Useful life 30 years; straight-line depreciation; residual value 0 ). 6. On 1 January, 15,000 was paid for a three-year insurance contract. 7. On January 15 , goods for 80,000 were acquired and immediately paid in cash. 8. Total sales made during the year amounted to 195,000, of which 125,000 were paid in cash. 9. Cost of goods sold was 60,000. 10. Wages totalling 33,000 were paid during the year. At the end of the year, the business owed 5,000 of wages for the last month of the year. 11. On 31 December 2019. The company recorded the depreciation for van and for the equipment bought on 1 January 2019. It has also adjusted the account for insurance. Required: a) Discuss the impact of each transaction on the Income Statement and Balance Sheet (Hint: You need to outline whether the transaction increases or decreases revenue, or expense in the Income Statement, and/or assets, and/or liabilities, and/or share capital in the Balance Sheet, as well as the amount of each increase or decrease) b) Prepare an income statement for the year ended 31 December 2019. c) Prepare a balance sheet as at 31 December 2019. NB: Ignore taxation