The trial balance of M Limited at 30 November 2021 was as follows. M Limited Trial Balance at 30 November 2021 Debit Credit $ Revenue $\quad$ 203600 Inventory at 1 December 2020 $\quad$ 12945 Purchases $\quad$ 143750 Rent and rates $\quad$ 12460 Operating expenses $\quad$ 12920 Wages $\quad$ 24 380 Equipment at cost $\quad$ 40000 Provision for depreciation of equipment $\quad$ 17500 Trade receivables $\quad$ 9800 Provision for irrecoverable debts $\quad$ 295 Bank $\quad$ 162 Trade payables $\quad$ 11585 Ordinary share capital $\quad$ 20000 General reserve $\quad$ 3000 Retained earnings $\quad$ 2037 Dividend paid on ordinary shares $\quad$ 1600 $\quad$ 258017 $\quad$ 258017 Additional information 1 Inventory at 30 November 2021 was valued at $12830. 2 Depreciation on equipment is to be charged at 25% per annum using the reducing balance method. 3 Accrued operating expenses at 30 November 2021 were $415. 4 Rent includes a payment of $2250 for the 3 months from 1 October 2021 to 31 December 2021. 5 The provision for doubtful debts is to be set at 4% of trade receivables. 6 No dividends were outstanding at 30 November 2021. 7 $1000 is to be transferred to the general reserve at 30 November 2021.

1. (a)Prepare the income statement for M Limited for the year ended 30 November 2021.[7]
2. (b)Prepare the statement of changes in equity for M Limited for the year ended 30 November 2021.[5]
3. (c)Calculate the liquid ratio for M Limited at 30 November 2021. The answer should be correct to two decimal places.[3]
4. (d)Advise Emily whether to fund the purchase of the equipment by issuing further ordinary shares or by requesting a bank overdraft. Justify your answer.[5]