The following balances were in the ledger of Aarchi on 1 January 2012: Sundry expenses 600 Dr Premises repairs 250 Dr Rent receivable 300 Dr The following were the transactions for the year ended 31 December 2012. All payments and receipts were made by cheque: 1. Sundry expense payments: 14 May Paid 500 30 October paid 900 for the six months to 31 March 2013 2. Premises repairs payments: 8 January Paid 450 1 April Paid 900 18 August Paid 875 On 31 December 2012 it was estimated that 340 was owing for premises repairs. 3. Rent receivable: 6 February Received 1 200 26 June Received 900 The rent receivable for the year was 1 600. Required: (a) Explain the meaning of the debit balance on the Rent receivable account on 1 January 2012. (4) (b) Prepare the following accounts for the year ended 31 December 2012, including the appropriate transfer to the financial statements: (i) Sundry expenses account (4) (ii) Premises repairs account (4) (iii) Rent receivable account. (4) On 1 January 2012 Aarchi had the following additional balances in his ledger: Machine at cost 36 000 Machine - provision for depreciation ? All machinery was purchased on 1 January 2010 and has a residual value of 2 000. Aarchi has depreciated his machinery over a five-year period using the straight line method. She has decided to change her method of depreciation to 25% per annum reducing balance, backdated to the date of machine purchase. The change and adjustment are to be recorded in the Statement of Comprehensive Income for the year ended 31 December 2012. On 1 April 2012 a new machine was purchased: Cost 8 000 Installation 1 600 Staff training 2 000 Annual machine insurance 00 400 12 000 She charges a full year's depreciation on machines in the year of purchase. Required: (c) State one accounting concept which: (i) Supports the change of depreciation method proposed by Aarchi. (ii) Does not support the change of depreciation method proposed by Aarchi. (4) (d) Distinguish between capital expenditure and revenue expenditure. (4) (e) State, giving your reasons, whether each of the following is capital expenditure or revenue expenditure: Machine installation Annual insurance expenses on machinery Legal costs of buying a Machinery Machinery repairs (4) (f) Calculate, showing clearly all workings, the: (i) Adjustment required to the provision for depreciation on the machines to 31 December 2011 to account for the change in depreciation method (ii) Depreciation charge on all the machines for the year ended 31 December 2012. (8) (g) Prepare, for the year ended 31 December 2012, the: (i) Machinery account (3) (ii) Machinery - provision for depreciation account. (5) (h) Evaluate Aarchi's decision to change the basis of charging depreciation on machines from the straight line method to reducing balance method.