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Here is the solution to your questions in English: a) Income Statement for the year ended 30 June 2016. Step 1: Calculate Sales Revenue and Cost of Sales. Sales revenue is given. Cost of sales requires calculating closing inventory, which is derived from the gross profit margin. Sales = Sh. 91,000 Gross Profit (20% of Sales) = 0.20 × Sh. 91,000 = Sh. 18,200 Cost of Sales = Sales - Gross Profit = Sh. 91,000 - Sh. 18,200 = Sh. 72,800 Opening Inventory (1 July 2015) = Sh. 26,400 Purchases = Sh. 68,000 Closing Inventory = Opening Inventory + Purchases - Cost of Sales = Sh. 26,400 + Sh. 68,000 - Sh. 72,800 = Sh. 21,600 Step 2: Calculate Operating Expenses. Selling and distribution expenses:* Sh. 2,750 Administrative expenses:* Sh. 5,300 (from trial balance) - Sh. 500 (prepayment, additional info 2) = Sh. 4,800 Discounts allowed:* Sh. 1,350 Bad debts written off:* Sh. 640 (additional info 4) Increase in allowance for doubtful debts:* Trade receivables (before write-off) = Sh. 14,640 Trade receivables (after write-off) = Sh. 14,640 - Sh. 640 = Sh. 14,000 New allowance = 5% of Sh. 14,000 = Sh. 700 (additional info 5) Old allowance (1 July 2015) = Sh. 610 Increase in allowance = Sh. 700 - Sh. 610 = Sh. 90 Depreciation - Machinery:* 10% of Sh. 18,000 (cost) = Sh. 1,800 (additional info 6) Depreciation - Furniture:* Cost = Sh. 6,000 Carrying value (1 July 2015) = Sh. 6,000 - Sh. 2,160 (accumulated depreciation) = Sh. 3,840 Depreciation = 20% of Sh. 3,840 = Sh. 768 (additional info 6) Insurance expense:* Sh. 2,100 (total paid for 3 years) / 3 years = Sh. 700 (additional info 3) Step 3: Prepare the Income Statement. Furaha Ltd. Income Statement for the year ended 30 June 2016 (All figures in Sh. '000) lrr Revenue & & \\ Sales & & 91,000 \\ Less: Cost of Sales & & (72,800) \\ Gross Profit & & 18,200 \\ Add: Other Operating Income & & \\ Discounts received & & 1,100 \\ Total Income & & 19,300 \\ Less: Operating Expenses & & \\ Selling and distribution expenses & 2,750 & \\ Administrative expenses (5,300 - 500) & 4,800 & \\ Discounts allowed & 1,350 & \\ Bad debts written off & 640 & \\ Increase in allowance for doubtful debts & 90 & \\ Depreciation - Machinery & 1,800 & \\ Depreciation - Furniture & 768 & \\ Insurance expense (2,100 / 3) & 700 & \\ Total Operating Expenses & & (12,898) \\ Profit from Operations & & 6,402 \\ Less: Finance Costs & & \\ Debenture interest & & (160) \\ Profit Before Tax & & 6,242 \\ Less: Income Tax Expense & & 0 \\ Profit for the year & & 6,242 \\ b) Statement of Financial Position as at 30 June 2016. Step 1: Calculate Non-Current Assets. Freehold property (cost):* Sh. 28,000 Machinery:* Cost: Sh. 18,000 Accumulated depreciation (1 July 2015): Sh. 5,400 Depreciation for the year: Sh. 1,800 Total accumulated depreciation = Sh. 5,400 + Sh. 1,800 = Sh. 7,200 Net book value = Sh. 18,000 - Sh. 7,200 = Sh. 10,800 Furniture:* Cost: Sh. 6,000 Accumulated depreciation (1 July 2015): Sh. 2,160 Depreciation for the year: Sh. 768 Total accumulated depreciation = Sh. 2,160 + Sh. 768 = Sh. 2,928 Net book value = Sh. 6,000 - Sh. 2,928 = Sh. 3,072 Total Non-Current Assets = Sh. 28,000 + Sh. 10,800 + Sh. 3,072 = Sh. 41,872 Step 2: Calculate Current Assets. Closing Inventory:* Sh. 21,600 (calculated in part a) Trade Receivables (Net):* Original: Sh. 14,640 Less: Bad debts written off: Sh. 640 Adjusted receivables: Sh. 14,000 Less: Allowance for doubtful debts (new): Sh. 700 Net trade receivables = Sh. 14,000 - Sh. 700 = Sh. 13,300 Bank balance and cash in hand:* Sh. 2,100 Prepayments:* Administrative costs prepayment: Sh. 500 Insurance prepayment: Sh. 1,400 (Sh. 2,100 total paid - Sh. 700 expense for the year) Total Prepayments = Sh. 500 + Sh. 1,400 = Sh. 1,900 Total Current Assets = Sh. 21,600 + Sh. 13,300 + Sh. 2,100 + Sh. 1,900 = Sh. 38,900 Total Assets = Sh. 41,872 + Sh. 38,900 = Sh. 80,772 Step 3: Calculate Equity. Ordinary Share Capital:* Sh. 30,000 10% Preference Share Capital:* Sh. 20,000 Share Premium:* Sh. 5,000 Retained Earnings:* Opening (1 July 2015): Sh. 12,330 Add: Profit for the year: Sh. 6,242 Less: Interim Preference Dividend paid: Sh. 800 Less: Interim Ordinary Dividend paid: Sh. 1,200 Less: Proposed Ordinary Dividend (6% of Sh. 30,000): Sh. 1,800 Less: Proposed Preference Dividend (10% of Sh. 20,000): Sh. 2,000 Retained Earnings (30 June 2016) = Sh. 12,330 + Sh. 6,242 - Sh. 800 - Sh. 1,200 - Sh. 1,800 - Sh. 2,000 = Sh. 12,772 Total Equity = Sh. 30,000 + Sh. 20,000 + Sh. 5,000 + Sh. 12,772 = Sh. 67,772 Step 4: Calculate Non-Current and Current Liabilities. Non-Current Liabilities:* 8% Debentures: Sh. 2,000 Current Liabilities:* Trade Payables: Sh. 7,200 Proposed Dividends: Proposed Ordinary Dividend: Sh. 1,800 Proposed Preference Dividend: Sh. 2,000 Total Proposed Dividends = Sh. 1,800 + Sh. 2,000 = Sh. 3,800 Total Current Liabilities = Sh. 7,200 + Sh. 3,800 = Sh. 11,000 Total Equity and Liabilities = Sh. 67,772 + Sh. 2,000 + Sh. 11,000 = Sh. 80,772 Step 5: Prepare the Statement of Financial Position. Furaha Ltd. Statement of Financial Position as at 30 June 2016 (All figures in Sh. '000) lrr Assets & & \\ Non-Current Assets & & \\ Freehold property (cost) & 28,000 & \\ Machinery (cost) & 18,000 & \\ Less: Accumulated depreciation & (7,200) & 10,800 \\ Furniture (cost) & 6,000 & \\ Less: Accumulated depreciation & (2,928) & 3,072 \\ Total Non-Current Assets & & 41,872 \\ & & \\ Current Assets & & \\ Closing Inventory & 21,600 & \\ Trade Receivables (Net) & 13,300 & \\ Bank balance and cash in hand & 2,100 & \\ Prepayments & 1,900 & \\ Total Current Assets & & 38,900 \\ Total Assets & & 80,772 \\ & & \\ Equity and Liabilities & & \\ Equity & & \\ Ordinary Share Capital & 30,000 & \\ 10\% Preference Share Capital & 20,000 & \\ Share Premium & 5,000 & \\ Retained Earnings & 12,772 & \\ Total Equity & & 67,772 \\ & & \\ Non-Current Liabilities & & \\ 8\% Debentures & & 2,000 \\ & & \\ Current Liabilities & & \\ Trade Payables & 7,200 & \\ Proposed Dividends & 3,800 & \\ Total Current Liabilities & & 11,000 \\ Total Equity and Liabilities & & 80,772 \\ That's 2 down. 3 left today — send the next one.