Q5.

Moon ltd. Has an authorized capital of Rs. 4, 000,00 divided into 40,000 of Rs. 10 each. Following is the pre closing trail balance on December 31, 2013. (7 Marks)

Moon light

Trail Balance

As on December 2013

debit balances		credit balances
Cash	17,000	share capital	800,000
acc. Receivable	30,000	All. For bad debits	1,500
inventory	140,000	acc. Payable	25,000
machinery	400,000	retained earnings	200,000
building	700,000	sales	500,000
purchases	300,000	commission income	3,500
carriage in	2,000	10% bond payable	100,000
salaries expenses	18,000
director's fees	10,000
rent expenses	8,000
office supplies	2,000
prepaid insurance	3,000
TOTAL	1,630,000		1,630,000

Additional information:

1. Depreciation for the year of machinery at 10% and building at 15%.
2. Insurance expired Rs. 1000
3. Rent expenses for the year was Rs.6000
4. Allowance for bad debts is to be maintained at 4 percent of account receivable.
5. Accrued interest on bond for three months.
6. Merchandise ending valued Rs. 70,000
7. The company decided to declare cash dividend of Rs. 15000 and appropriate a sum of Rs. 40000 for building extension.

REQUIRED:

1. Prepare an income statement for the year ended December 31, 2013.

2. Prepare balance sheet as on December 31, 2013.