Reference no: EM133143536

Question - Below is the trial balance of Martina's Mechanical Services at 5 April 2021.

	£	£
Trading account:
Sales		1,370,000
Opening inventory	129,000
Purchases	902,000
Carriage inwards	1,630
Other revenues and expenses:
Income from repair services		12,720
Rent	29,500
Insurance	4,320
Advertising expense	2,760
Heating and lighting	3,920
Shop and office expenses	28,500
Salaries and wages	43,652
Discounts allowed	2,950
Carriage outwards	3,174
Balance sheet accounts:
Fixtures and fittings at cost	312,000
Fixtures and fittings - accumulated depreciation at 6 April 2019		70,000
Motor vehicles at cost	136,000
Motor vehicles - accumulated depreciation at 6 April 2019		53,200
Receivables	69,128
Allowance for receivables (at 6 April 2019)		2,950
Bank	18,650
Payables		41,328
Loan		40,000
Capital		130,046
Drawings	33,060
	1,720,244	1,720,244

The following information is relevant.

1. The closing inventory at 5 April 2021 is valued at £132,690.

2. On 5 February 2021 Martina sold a motor vehicle for £8,200. The customer was due to pay Martina's Mechanical Services on 5 April 2021 but only paid half of the amount due by cheque on this last day of the accounting year. Nothing regarding the disposal transaction, including any cash received, has been recorded in the accounts. This motor vehicle had been bought on 6 October 2018 for £15,400.

3. On 5 December 2020, Martina bought a new motor vehicle for £18,000 on purely credit terms. Martina mistakenly debited Fixtures and Fittings at cost.

4. Depreciation on motor vehicles is provided at 25% per annum using the reducing balance basis on a monthly pro-rata basis. Depreciation on fixtures, fittings and equipment is provided at 10% per annum on the straight line basis, assuming no residual value. There were no purchases or disposals of fixtures, fittings, and equipment during the year.

5. Martina estimates that £2,760 due from customers will be irrecoverable and must be written off.

6. The allowance for receivables is to be set at 3% of net receivables at 5 April 2021.

7. Rent includes a prepayment of £620.

8. The heating bill will arrive on 5 June 2021 and £390 is expected to relate to the period ended 5 April 2021.

9. An invoice for £870 for insurance needs to be recorded and accrued for the same period.

10. The long-term loan is repayable in 10 years' time. Interest payable on the loan is 8% and will be paid once per year.

Required -

a. Prepare the income statement for Martina's Mechanical Services for the period ended 5 April 2021.

 b. Prepare the balance sheet for Martina's Mechanical Services as at 5 April 2021.