Rowlock Ltd. was incorporated on 1st October, 2016 to acquire Rowlock’s mail order business, with effect from 1st June, 2016. The purchase consideration was agreed at ~ 35,000 to be satisfied by the issue on 1st December, 2016 to Rowlock or his nominee of: 20,000 equity shares of Re 1 each, fully paid and ~ 15,000, 7% Debentures. The entries relating to the transfer were not made in the books which were carried on without a break until 31st May, 2017. On 1st May, 2017 the Trial Balance extracted from the books showed the following:

(3) Wrapping, postage and packing expenses varied in direct proportion to sales, while office expenses were constant each month.
(4) Formation expenses are to be written off. You are required to prepare the Trading and Profit and Loss Account for the year ended 31st May, 2017 apportioned between the periods before and after incorporation and Balance Sheet as on the date.

Transcribed Image Text:

Particulars Sales Purchases Wrapping Postage Warehouse rent and rates Packing expenses Office expenses Stock on 31st May, 2016 ₹ 52,185 Director's salary 38,829 Particulars 1,890 627 5,261 Debenture Interest (gross) 840 Fixed Assets 441 Current Assets (other than Stock) 921 Current Liabilities Formation expenses Capital Account - Rowlock, 31st May, 2016 Drawings Account - Rowlock 1,000 525 25,000 9,745 4,162 218 29,450 500 You also ascertain the following: (1) Stock, 31st May 2017 amounted to 4,946. (2) The average monthly sales for June, July and August were one-half of those for the remaining months of the year. The gross profit margin were constant throughout the year.