The following balances were taken from Jane's books who is a sole trader and operates a catering business.

Jane's trial balance for the year to 30th June 2019 was as follows:

Trial Balance	Dr ()	Cr ()
Equipment at cost	42,000
Accumulated depreciation of equipment as at 1st July 2018		35,000
Inventory as at 1st July 2018	50,800
Debtors	32,000
Bank / cash	112,678
Creditors		23,027
Provision for doubtful debts as at 1st July 2018		1,280
Long term loan (at 10% per annum)		50,000
Owners capital		30,640
Retained profits as at 1st July 2018		62,901
Sales		353,800
Purchases	185,000
Motor expenses	34,890
Loan interest (all relating to long term loan)	2,500
Insurance	56,790
Rent	24,500
Office expenses	14,890
Bad debts written off	600
Totals	556,648	556,648

Additional information

1. The stock/inventory as at 30th June 2019 originally cost 36,000. However, the estimated net realisable value is calculated at 35,200.
2. A motor vehicle repair carried out in September 2018 costing 400 was still unpaid at the end of the year.
3. Insurance prepaid as at 30th June 2019 was 1500.
4. Rent owing as at 30th June 2019 were 2050.
5. Increase the provision for doubtful debts to 6% of debtors.
6. Depreciation on equipment is to be taken at 25% on a reducing balance basis.

Required

1. Prepare Jane's income statement for the year ending 30th June 2019 and a statement of financial position as at 30th June 2019.

[30 Marks]

2. Jane has the opportunity to buy the freehold office premises she currently occupies for 200,000. She would be able to obtain a commercial mortgage for 100,000 at a rate of 10% per annum. She would like some advice on whether or not to take out the mortgage to buy the premises. Advise her on whether or not, in your opinion, if she should take out the mortgage and buy the premises. (Maximum word count: 100)