Question three

The following balances were extracted from the books of Mali MingiLimited as at 31 August 2020:

Particulars	KES 000
Capital: Authorized	3,500
Issued and fully paid ordinary shares of KES. 20 each	2,500
8% redeemable preference shares of KES. 20 each	600
9% debentures	800
Retained earnings as at 1 September 2019	1,990
Land	200
Buildings at cost	1,800
Provision for depreciation-buildings as at 1 September 2019	600
Fixtures and fittings at cost	4,000
Provision for depreciation-fixtures and fittings as at 1 September 2019	800
Sales	5,060
Inventory as at 1 September 2019	900
Purchases	3,050
Establishment expenses	270
Administration expenses	600
Discounts allowed	60
Discounts received	40
Allowance for doubtful debts	40
Trade receivables	1,290
Trade payables	500
Bank balance	760

Additional information:

1. Depreciation is to be provided as follows: Building2.5% p.a. on cost Fixtures andfittings10% p.a. oncost

The companys policy is to provide depreciation in the year of acquisition and none in the year of disposal.

2. The allowance for doubtful debts is to be increased to KES. 64,500

3. The interest on debentures for the year ended 31 August 2020 has been paid. The amount was correctly posted in the cashbook but wrongly debited to the trade receivables.

4. The following information is provided on the value of closing inventory as at 31 August 2020:

Net realizable value	KES. 1,380,000
Cost to the company	KES. 1,300,000
Selling price	KES. 1,900,000

5. During the year ended 31 August 2020, some items of fixtures andfittings were sold for KES. 60,000. The amount received was erroneously credited to sales. The items disposed off had cost the company KES. 200,000 and had a written down value of KES. 160,000 as at 1 September 2019.

6. The directors proposed to pay an ordinary dividend of KES. 2 per share. They have also proposed pay preference dividend.

7. Corporate tax rate is 30%.

8. The directors have agreed to transfer KES. 100,000 to the generalreserve.

Required:

(i) Prepare Statement of Profit or Loss and Other ComprehensiveIncome for the year ended 31 August 2020. (12 marks )

(ii) Prepare Statement of financial position 31 August 2020.( 8 marks)