Question 1 (70 marks) The following trial balance has been extracted from the ledger of K. Chaffinch, a sole trader, as at 31 March 2022, the end of her most recent financial year. Debit Credit Vehicles, at cost 76,000 Furniture and fittings, at cost 52,000 Provision for depreciation (as at 1 April 2021): Vehicles 28,000 Furniture and fittings 26,000 Inventories as at 1 April 2021 16,000 Purchases 248,000 Sales revenue 418,000 Returns inwards 2,560 Discounts received 3,280 Wages and salaries 42,600 Rent 24,000 Loan interest 1,200 Carriage outwards 4,320 Carriage inwards 3,540 Other operating expenses 43,600 Trade receivables 26,320 Trade payables 26,300 Allowance for irrecoverable receivables 420 Cash on hand 250 Cash at bank 8,610 Drawings 18,000 5-year bank loan 40,000 Capital, as at 1 April 2021 25,000 567,000 567,000 INT1008 April 2022 2 The following additional information as at 31 March, 2022 is available: 1. Closing inventory as at 31 March 2022 is valued at 17,200 2. Depreciation is calculated at the end of the year and is calculated as follows: Vehicles: 25% per annum using the reducing balance method. No vehicles were bought or sold during the financial year Fixtures and fittings: 20% per annum using the straight-line method Fixtures with a cost of 8,000 and accumulated depreciation of 5,000 was sold for 2,000 on 2 March 2022. No entries regarding the disposal have been recorded in the ledgers The business has a policy of not providing for depreciation in the year of disposal. 3. Loan interest of 800 has still to be paid 4. Other operating expenses include an insurance payment for 3,600 which relates to the year ended March 2023. 5. An irrecoverable receivable/bad debt of 320 is to be written off and the allowance for irrecoverable receivables is to be adjusted to 2% of trade receivables at 31 March 2022 6. K. Chaffinch took 500 from the business bank account to spend on personal items. No entries have been made in the ledgers of K. Chaffinch. 1a) Prepare the following financial statements for K. Chaffinch: Statement of profit or loss for K. Chaffinch for the year ending 31 March 2022 (28 marks) Statement of financial position for K. Chaffinch as at 31 March 2022 (26 marks) 1b) Explain, supported by an example for each, the following concepts that should be adopted when preparing the financial statements of a business. You are to refer to your financial statements from 1a) when providing an example (16 marks) I. Materiality concept II. Revenue recognition concept III. Prudence concept IV. Duality concept