QUESTION TWO Shimpundu is a sole trader and prepares his financial statements to 31st December each year. His trial balance for the year to 31st December 2019 is given below: K K Proprietor's Capital 50,000 Retained profit (01/01/2019) 15, 000 Purchases and Sales 6, 000 40,000 Inventory 01/01/2019 10,000 Trade receivables and payables 20,000 3,000 Cash at Bank and on hand 7,000 Equipment at cost 15, 000 Accumulated depreciation (01/01/2019) 2,000 Motor vehicle at cost 40,000 Accumulated depreciation (01/01/2019) 5,000 Furniture and fittings at cost 10,000 Accumulated depreciation (01/01/2019) 3,000 Medical expenses 500 Insurance 600 Cleaning expenses 750 Carriage inwards 500 Carriage outwards 1,500 Returns inwards and outwards 2,000 1, 700 Wages 6,000 Bank loan 7, 350 Interest 500 Rent 6,000 Bad debts 1,500 Provision for doubtful debts 800 127. 850 127. 850 Additional information: 1. Closing inventory on 31 December was valued at K6, 500 2. All assets are depreciated at 30% on reducing balance method. 3. Included in the rent figure is K1, 000 paid for two months to 31st January 2020. 4. An electricity bill for K300 for the month of December 2019 was not received until 10th January 2020. 5. The provision for doubtful debts is to be increased to K1, 000. 6. A bad debt of K500 previously written off was recovered during the year. Required: Prepare the Statement of Profit or Loss and the Statement of Financial Position for Shimpundu for the year to 31st December 2019. 25 Marks