QUESTION 1 (Total 25 marks) The following is an extract from a letter written to you by Mr Thompson, a retailer, whose final accounts you have recently prepared. "I have examined the accounts you have sent me and I am puzzled about the following: a) During the year, I used a business cheque to buy a new washing machine for my wife to use at home. Why is this not included on the Balance Sheet? b) I cannot understand why the business bank overdraft has increased in spite of the fact that the business has made a profit. Can you give me three possible reasons why this may have happened? c) My friend, John, says that I should keep an eye on my gross profit margins. What does this mean? d) Why have you included my freehold shop at its original cost of $30,000, although its current market value is about $50,000 ? e) I bought a van two years ago for $12,000, assuming it would be in use for five years and then be worth nothing. Why have you included this van on the Balance Sheet at a value of $7,200 when the market value of the van, according to a second-hand vehicles guide, is only $5,000 ?" Required: Comment on each of the five points above, making reference, where appropriate, to accounting concepts. Assume that Mr Thompson has very little accounting knowledge