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Charity, a sole trader has prepared the following accounts for the year ended $31$ December $2014.$

Income statement for the year ended $31$ December $2024$

Sales

$$000$

$$00054,000$

Opening inventory

$9,000$

Purchases

$45,000$

$54,000$

Closing inventory Cost of sale

$(15,000)$

$(39,000)$

Gross profit

$15,000$

Expenses Wages

$4,200$

Advertising

$720$

Rates

$1,170$

Electricity and communications

$900$

Bank charges

$330$

Depreciation of equipment

$600$

$(7,920)$

Net Profit

$7,080$

Page $2$ of $3$

Statement of financial position as at $31$ December $2024$

Noncurrent assets

$$000$

$$000$

Property, plant and equipment:

Freehold land and buildings $($Net book value$)$

$24,000$

Equipment at cost

$6,000$

Deduct: Depreciation

$(4,200)$

$1,800$

Current assets:

$25,800$

Inventory

$15,000$

Accounts receivable

$4,500$

Prepayments: rates

$300$

Cash in hand

$264$

$20,064$

Total assets

$45,864$

Capital: at $1$ January $2024$

$33,000$

Profit for the year to $31$ December $2024$

$7,080$

$40,080$

Drawings during the year ended $31$ December $20247,935$

$32,145$

Current liabilities

Accounts payable $3,750$

Accruals: advertising $60$

Bank overdraft $9,909$

$13,719$

Total capital and liabilities $45,864$

Charity would like to know her financial performance and position for year $2025.$ She has requested that you prepare forecast financial statements for years $2025.$ The following information is relevant for the forecast financial statements:

$1.$

Sales are expected to rise by one third. All sales are on credit, and customers will continue to be allowed one month$$s credit.

$2.$

Purchases will increase by one fifth. All are on credit, but the credit taken will rise

from $1$ to $1(1)/(2)$ months.

Page $3$ of $3$

$3.$

The gross profit margin is expected to average $30\%..$

$4.$

Rates are expected to rise by one eighth and will be $$ prepaid.

$5$ Advertising expense will increase by $$200,000$ and will be $25\%$ owing at the end of every financial period.

$6.$

Wages are expected to rise by $10\%$ and electricity and communications by $15\%.$

$7.$

Depreciation will be charged at $10\%$ on cost$.$

$8.$

Cash in hand will increase by $$300,000.$

$9.$

Bank charges will increase by $5\%.$

$10.$

Charity anticipates that she will withdraw sh$.4$ million in $2025.$

Required: For $2025.$

$($a$)$

Forecast income statement $(10$ marks$)$

$($b$)$

Forecast statement of financial position $(10$ marks$)$

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