Question Two

The following balances were extracted from the books of Bashara Kabwa Enterprises, a wholesale business, as at 31 October 2018:

Drawings 660,000

Trade receivables 990,000

Purchases 2,303,840

Sales returns 79,420

Capital 4,101,100

Trade payables 330,000

Sales 4,691,280

Purchases returns 120,340

Discount received 93,720

Provision for depreciation: Motor vehicles 176,000

Fixtures and fittings 63,800

Allowances for doubtful debts 44,000

15% bank loan 220,000

Salaries and wage 1,034,000

Discount allowed 54,560

Bank balance 568,260

Cash in hand 26,400

Electricity expenses 103,840

Rent and rates 54,560

Freehold premises (cost) 1,569,700

Fixtures and fittings (cost) 334,400

Motor vehicles (cost) 462,000

Stationery 34,320

Postage and telephone expenses 44,000

Insurance premiums 13,200

Bad debts written off 15,840

Motor vehicle expenses 84,920

Inventory (1 November 2017) 1,393,480

Interest on bank loan 16,500

Additional information:

1. The value of inventory as at 31 October 2018 was Sh. 1,036,400
2. Sales includes Sh. 300,000 worth of goods sold by Bashara Kabwa Enterprises agents, who are allowed 15% commission on such sales. This transaction has not been recorded in the books.
3. Depreciation is to be provided as follows:

Fixtures and fittings 10% per annum on reducing balance basis.

Motor vehicle 15% per annum on straight line basis.

4. Annual insurance premium amounted to Sh. 12,000.
5. As at 31 October 2017, there was a balance of Sh. 65,000 received from a customer in cash.
6. Salaries and wages were in arrears of Sh. 35,000
7. The Electricity bill for the month of October of Sh. 14,500 was received on 5 November 2018.
8. An allowance of 5% is to be maintained for doubtful debts.
9. Goods worth Sh. 48,840 had been distributed to potential customers as free samples.

Required:

1. Income statement for the year ended 31 October 2018
2. Statement of Financial position as at 31 October 2018 (15 MARKS)