Question 2 (55 marks) Korean Matters, a grocery store established by Carl Man, the sole proprietor, prepared the following unadjusted trial balance for the financial year ended 30 June 20X0. Account Dr. $ Cr. S 895,000 158,750 332,500 45,500 102,500 245,700 Cash at bank Equipment at cost Furniture - at cost Accumulated depreciation - equipment Accumulated depreciation furniture Accounts receivable Accounts payable Bank loan Sales Purchase Inventory as at 1 July 20X9 Salary Rent Administrative expenses Utilities Insurance expenses Capital - Carl Man Drawings - Carl Man 128,640 650,000 1,611,090 569,360 152,440 320,000 192,000 108,360 95,620 120,000 600,000 248,000 Additional information: 1 The firm recorded a deposit of $35,000 paid by a customer for goods to be sold in July 20X0 as sales. 2 Salaries of $70,000 were to be accrued. 3 Depreciation for Equipment and Furniture is not yet provided. Equipment and Furniture are depreciated using the straight-line method with an estimated useful life of five years and seven years respectively with no salvage value. Depreciation is recorded once a year. 4 Insurance expenses of $120,000 covered the period from 1 October 20x9 to 30 September 20X0. 5 Inventory as at 30 June 20X0 was valued at $175,640. A repayment of $100,000 on the bank loan is required before 30 June 20X0. 6 Required: a Prepare journal entries for the year-end adjustments. Explanations are not required. (12 marks) b Prepare the income statement for the year ended 30 June 20x0. (17 marks) c Prepare the balance sheet as at 30 June 20x0. (18 marks) d What is the difference between the cash basis and accrual basis of accounting? Why is the accrual basis of accounting generally preferred over the cash basis? (8 marks)