SECTION B This question is COMPULSORY Question 6 Martina has been operating a number of souvenir shops in Malta and Gozo. Her business has been successfully growing over the past years. At the end of 2018 her accountant resigned from his position and she asked you to help her prepare the financial statements for the year ended 31st December 2018. Trial Balance as at 31 December 2018 Buildings 400,000 Equipment 60,000 Allowance for depreciation of buildings 1st January 2018 68,000 Allowance for depreciation of equipment 1st January 2018 24,000 Inventory 1st January 2018 25,500 Trade receivables and trade payables 28,600 22,500 Purchases and sales 460,000 754,000 Carriage inwards 3,400 Carriage outwards 1,650 Discounts allowed and received 2,500 1,900 Allowance for trade receivables 1st January 2018 4,300 Sales returns and purchase returns 8,400 6.500 Salaries 65,400 Irrecoverable debts 2,600 5% Loan 70,000 Prepaid insurance 14 January 2018 5,200 Insurance payments 24,000 Electricity and water 12,100 Sundry expenses 24,600 Rent received 6,000 Communication expenses 23,800 Bank overdraft 14,100 Cash in hand 250 Capital 1st January 2018 220,000 Advertising expense 4,800 Drawings 30,400 Repairs and maintenance 8,100 1,191,300 1,191,300 Martina provided you with the following additional information: a) The inventory of goods at 31 December 2018 was valued at 35,500. However, it was realized that goods issued on a sale-or-return basis costing 1,450 and having a sales value of 2,100 had been accounted as sales on credit, and excluded from the valuation of closing inventory. b) The allowance for receivables set aside the previous year represents the full amount due from a customer who was facing financial difficulties at the time. At the end of the year it was realized that the customer's business was dissolved and the amount due was to be written off as irrecoverable debts. No entries were made. Moreover, following a review of amounts due from customers at the end of the year it was estimated that 11,700 may not be collected. c) Loan interest has not been paid. The loan was received on 1st April 2018. d) The advertising expense relates to an advertising campaign to introduce a new product. It was launched on 1" December 2018. The campaign will run in the local media for 4 months. e) The rent receivable is 600 every month. The insurance payments are for the year ended 31 March 2019. 9) On 31 December 2018 communication expenses of 4,300 were still unpaid and a payment of 1,250, which is already included in the payments, represents a payment in advance. h) Salaries c2,600 were unpaid at the end of the year while sundry expenses include a prepayment of 850. 1) Depreciation is provided at the rate of 5% on the cost of buildings and 20% on the book value of equipment. 1) Martina had taken goods valued 2,500 for her own personal use and paid for a personal holiday amounting to C2,800 out of business funds. No record had been made of the inventory withdrawal but the holiday expenses were included in the sundry expenses. Required: 1. The statement of profit or loss for the year ended 31 December 2018. II. The statement of the financial position as at that date. (18) (12) (Total: 30 marks)