The following list of balances has been extracted from the financial records of Pemba Plc as at 31st December 2018:

Details

Amount (K)

Sales

11,178,000

Purchases

7,625,000

Inventory at 1 January 2018

850,000

Administrative salaries

620,000

Selling and distribution wages

400,000

Rent, rates and insurance

219,000

Telephone expenses

210,000

Advertising

175,000

Debenture interest paid

35,000

Heat and light

213,000

Bank overdraft interest

35,000

Audit fees

91,000

Ordinary shares of 50 ngwee each

1,200,000

Retained profits at 1 January 2018

680,000

Bank overdraft

430,000

10% Debentures 2030

700,000

Property at cost

1,900,000

Depreciation of property at 1 January 2018

250,000

Machinery at cost

1,500,000

Depreciation of machinery at 1 January 2018

450,000

Motor vehicles at cost

480,000

Depreciation of motor vehicles at 1 January 2018

80,000

Trade receivables

960,000

Trade payables

345,000

Additional information:

(i) The closing inventory at 31 December 2018 was valued at K935,000.

5

(ii) Depreciation is to be charged on the following bases:

Property 2% of cost

Machinery 10% of cost

Motor vehicles 20% of reducing balance

(iii) Electricity used in the year but not paid for was K3,000.

(iv) Debenture interest unpaid must be provided for, as well as a tax liability of K500,000.

(v) The annual insurance policy of K90,000 was paid in full to 30 June 2019.

Required:

(a) Prepare the income statement of Pemba Plc for the year ended 31st December 2018. [10 Marks]

(b) Prepare the statement of financial position of Pemba Plc at 31st December 2018.

[10 Marks]

[Total: 20 Marks