Trading account:

Sales 484,000

Opening inventory 60,000

Purchases 245,000

Other revenue and expenses:

Subscription income 12,300

Rent 22,000

Heating and lighting 6,300

Advertising expense 2,100

Wages 22,000

Motor expenses 6,200

Discounts allowed 2,800

Balance sheet accounts:

Motor vehicles at cost 120,000

Motor vehicle - accumulated depreciation 30,000

Equipment at cost 80,000

Equipment - accumulated depreciation 16,000

Receivables 52,000

Allowance for receivables 4,000

Bank 35,000

VAT liability 32,500

Payables 26,900

Loan 20,000

Capital 70,000

Drawings 42,300

695,700 695,700

The following information is relevant for the end-of-period adjustments.

1. The closing inventory at 31 December 20X2 is valued at 58,200.

2. The subscription income amount of 12,300 in the trial balance relates to

the period from 1 May 20X2 to 30 April 20X3.

3. Depreciation on the motor vehicle is provided at 25% per annum on the

reducing balance method.

4. Depreciation on the equipment is provided at 10% per annum on the

straight line basis, assuming no residual value.

5. Zoltan estimates that 4,750 due from customers will be irrecoverable and

must be written off.

6. The allowance for receivables is to be set at 8% of net receivables at 31

December 20X2.

7. Rent includes a prepayment of 2,000.

8. Advertising expense includes a prepayment of 500.

9. The heating bill will arrive on 20 January and about 1,200 is expected to

relate to the period until 31 December.

10. The long-term loan is repayable in 10 years time. Interest payable on the

loan is 5% and will be paid once per year.

Required:

(a) Prepare the income statement for Zoltans Business for the year ended 31

December 20X2.