Yip Interiors Ltd runs a home furnishing business. The companys trial balance as at 31 March 2006 before any adjustments have been made is as follows:

The new bookkeeper is uncertain as to how to deal with the following items:

1. On 1 July 2005 , 80,000 of new $1 ordinary shares were issued to the existing shareholders at a price of $3.00 each. This was in order to purchase new premises for the business. The money was paid into the special bank account and spent thus:

New Premises $200,000

Costs of share issue $20,000

Bonus to Employees $20,000

No entries have yet been made in the accounting records in respect of this transaction.

2. The suspense account is made of the following items:

Payment made in respect of an advertising campaign to run from 1 January 2006 to 31 March 2006 $12,000

Fee received for carrying an advertisement on the side of the delivery vans 1 year trial from 1 April 2006 ($2,000)

3.Expenses paid consists of:

4. The company does not have bad debts provision. However,it has now been decided to write-off irrecoverable debts totalling $5,000 and to make a provision of 3 % against the remaining trade receivable as at 31 March 2006.

5. A Inventory take on 31 March 2006 valued inventory at cost $127,920. Included in this figure is some damaged inventory which had cost the company $1,500. They were subsequently sold in a clearance sale for $1,000 in April 2007.

6. The interest on the long-term loan is due on the 30 September 2006. The loan was taken up on the 1St of October 2005 and is due to be repaid in 2012.

7. The prepayment as 1 April 2005 shown in the trial balance is inrespect of one months rent on the business former premises which were vacated on 1 July 2005.

8. Depreciation is to be provided at the following rates per annum using the straight-line method.

Premises 2%

Shop fittings 10%

Delivery Vans 20%

9. It is proposed to pay dividend of $0.40 per share on1 May 2006.

10.The corporation tax for the year is expected to be $40,000. The auditors have indicated that the provision for audit fees should be for $5,000.

11. $10,000 is to be transferred from the retained profit to the General reserves.

Note: Cost of the share issue are to be charged to the share premium account.

Required:

a. An income Statement for the year-ended 31 March 2006 and a statement of financial position as at 31 March 2006

b. A Statement of Changes equity for the year ended 31 March 2006

Debit Credit CA | 160,000 64,000 30,000 12,000 144,600 230,720 3,000 43,150 Delivery Vans: Cost | Accumulated Depreciation | Shop Fittings Cost Accumulated Depreciation | Inventory as at 1/4/2005 | Accounts Receivables | Prepayments at 1 April 2005 Cash at Bank Trade Payable Suspense Accounts Share Capital ($1 ordinary shares) | Share Premium account | Retained Profit at 1 April 2005 General Reserves Long-term loan 12% Expenses Sales Purchases Total 120,190 10,000 | 100,000 40,000 59,440 10,000 40,000 247,200 | 1,420,740 997,700 1,866,370 1,866,370 Rent & rates Wages & salaries Electricity Transport cost Sundry expenses $54,440 85,000 17,510 30,060 60,190 247,200 Debit Credit CA | 160,000 64,000 30,000 12,000 144,600 230,720 3,000 43,150 Delivery Vans: Cost | Accumulated Depreciation | Shop Fittings Cost Accumulated Depreciation | Inventory as at 1/4/2005 | Accounts Receivables | Prepayments at 1 April 2005 Cash at Bank Trade Payable Suspense Accounts Share Capital ($1 ordinary shares) | Share Premium account | Retained Profit at 1 April 2005 General Reserves Long-term loan 12% Expenses Sales Purchases Total 120,190 10,000 | 100,000 40,000 59,440 10,000 40,000 247,200 | 1,420,740 997,700 1,866,370 1,866,370 Rent & rates Wages & salaries Electricity Transport cost Sundry expenses $54,440 85,000 17,510 30,060 60,190 247,200