QUESTION THREE The following list of balances has been extracted from the financial records of Pemba # Plc as at 31 December 2018: Details Amount (K) Sales 11,178,000 Purchases 7,625,000 Inventory at 1 January 2018 850,000 Administrative salaries 620,000 Selling and distribution wages 400,000 Rent, rates and insurance 219,000 Telephone expenses 210,000 Advertising 175,000 Debenture interest paid 35,000 Heat and light 213,000 Bank overdraft interest 35,000 Audit fees 91,000 Ordinary shares of 50 ngwee each 1,200,000 Retained profits at 1 January 2018 680,000 Bank overdraft 430,000 10% Debentures 2030 700,000 Property at cost 1,900,000 Depreciation of property at 1 January 2018 250,000 Machinery at cost 1,500,000 Depreciation of machinery at 1 January 2018 450,000 Motor vehicles at cost 480,000 Depreciation of motor vehicles at 1 January 2018 80,000 Trade receivables 960,000 Trade payables 345,000 Additional information: (0) The closing inventory at 31 December 2018 was valued at K935, 000. (ii) Depreciation is to be charged on the following bases: Property 2% of cost Machinery 10% of cost Motor vehicles 20% of reducing balance (iii) Electricity used in the year but not paid for was K3,000. (iv) Debenture interest unpaid must be provided for, as well as a tax liability of 500, 000 (v) The annual insurance policy of K90,000 was paid in full to 30 June 2019. Required: (a) Prepare the income statement of Pemba Plc for the year ended 31st December 2018 (b) Prepare the statement of financial position of Pemba Plc at 31st December 2018