The following trial balance was extracted from the books of Rose Martins, a sole trader on 31 December 2019.

Sh. Sh.

Capital 2,880,000

Freehold land and buildings at cost 1,120,000

Motor vehicles at cost 1,094,000

Furniture and fittings at cost 240,000

Stock at 1 January 2019 960,000

Purchases and sales 9,408,000 11,088,000

Debtors and creditors 936,000 695,200

Discounts allowed and received 195,200 119,200

Returns inwards and outwards 16,000 28,800

Rent received 44,000

Loan (interest payable 5% per annum) 192,000

Interest on loan 4,800

Proceeds of sale of motor vehicle 150,000

Provision for doubtful debts 27,200

Bad debts 52,000

Wages and salaries 1,127,200

Drawings 256,000

General expenses 138,400

Bank balance 108,800

Rates and insurance 48,000

Provisions for depreciation:

Furniture and fittings 160,000

Motor vehicle 320,000

15,704,400 15,704,400

Additional Notes:

a) Stock at 31 December 2019 was valued at Sh. 1,360,000.

b) As at 31 December 2019, wages and salaries outstanding amounted to Sh. 66,400.

c) Prepaid rates and insurance as at 31 December 2019 stood at Sh. 12,000.

d) Interest paid is only a half of the amount due for the year ended 31 December 2019.

e) Provision for doubtful debts is to be adjusted to 5%of the debtors.

f) Depreciation is to be provided for as follows:

Furniture and fittings at 5% on reducing balance method

Motor vehicles at 20% on straight line method.

g) Wages and salaries owing amounted to Sh. 40,000 on 31 December 2019.

Required:

i) Income statement for the year ended 31 December 2019. (8 Marks)

ii) Statement of financial position as at 31 December 2019. (7 Marks)