Question One

The following trial balance was extracted from the ledger books of Rocky Enterprises as at 31 October, 2022.

DR.CR.Capital 60,813,000Drawings6,444,000 Purchases andsales186,303,000245,226,000Receivables andPayables23,808,00016,386,000Rent2,640,0002,250,000Electricity738,000 Salaries andWages24,804,000 Provision for doubtful debts(1 November, 2021) 978,000Inventory (1 November, 2021))27,822,000 Insurance516,000 General expenses2,799,000 Bank4,500,000 Cash in hand246,000 Motor vehicles at cost29,000,000 Provision for depreciation on motor vehicles (1 November, 2021) 10,800,000Proceeds from saleof motor vehicle 5,750,000Motor vehicle expenses2,583,000 Premises at cost30,000,000 342,203,000342,203,000

Additional Information:

1. Stock as at close of business was valued at KES 59,304,000
2. Rent and insurancewere pre-paid by KES 220,000and KES 282,000 respectively as at 31 October, 2022.
3. Electricity is accrued by KES 600,000.

1. The provision for doubtful debts is to be adjusted so that it is 5% of trade debtors after taking into account that KES 2,016,000 of the debtors were to be regarded as bad.
2. Rent receivable as at 31 October, 2022 was KES 1,500,000.
3. Depreciation on motor vehicles has been and is to be charged at the rate of 20% per annum (using straight line method).
4. On 1 November,2021, a motor vehicle which had been purchased for KES 8,000,000on 1 November, 2018, was sold for KES 5,750,000. The only record of this disposal is the entry in the proceeds from the sale of the motor vehicle account. (Hint: Prepare the disposal account to get the gain/loss on disposal and transfer it to the income statement accordingly}.

Required:

1. Income statement for the year ended31 October, 2022. (10 marks).
2. Statement of financial positionas at 31 October, 2022. (10 marks).