In January 2004, Mr. Pandit decided to buy a residentialproperty and rent to various tenants. On 1st January 2004, heborrowed Rs. 30 Lakhs from a housing bank on a condition ofrepaying the loan in 10 annual installments with an interest @10%per annum. He put in his own savings of Rs. 15 Lakhs and bought aproperty having 5 flats in a fast developing locality. The cost ofthe property was Rs. 30 Lakhs comprising land valued at Rs. 15lakhs and building values at Rs. 15 lakhs.

The entire year of 2004 was spent in repairing and repaintingthe property. The cost of one-time repairs was Rs. 5 lakhs and thatof repainting, which was completed on 31st December 2004, was Rs.1.2 lakh. Mr. Pandit expected that this paint would last for 3years before it was repainted. The life of the property afterrepairs was expected to be 20 years. Mr. Pandit was informed thatcost of repairs and first year's interest on the bank loan had tobe added to the cost of building as it were incurred in bringingasset to a position of generating revenue.On December 31st of 2004,Mr. Pandit paid the first installment of loan together withinterest @10%.

The flats were ready to let out on 1st January 2005. 5 tenantssigned the agreement and paid interest free deposit equivalent to10 months rent. The monthly rent of each flat was Rs. 8000. Thethree tenants paid their rent regularly on the last day of themonth during 2005. One tenant Mr. Khanna, had indicated that hewould vacate the flat on 31st december 2005 and had not paid hisrent for November and december, requesting Mr. Pandit to adjust thesame against his deposit. Though Mr. Khanna vacated the flat on thedecided date, Mr. Pandit had yet to pay his balance deposit amount.Another tenant, Mr. Khan went abroad in December 2005 but hadpromised to pay the rent on return. Mr. Pandit had already found atenant for the flat vacated by Mr. Khanna and the new tenant paid adeposit of Rs. 80000 on 31st December 2005. Mr. Pandit paid thesecond installment of loan together with interest on 31st December2005. Mr. Pandit had made the following payments during 2005:

Taxes - Rs 20000

Electricity - Rs 10000

Telephone - Rs 10000

Fire Insurance was taken on January 1, 2005 for 4 years -premium Rs 60000

The closing cash/bank balance was Rs. 546000 on 31st December2005.

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Prepare the income statement and balance sheet of SamavyaBuilding as on 31st December 2005 and show each step in detail.