Smart Ltd. was incorporated on 1st August, 2010 with an authorised capital of 5,00,000 equity shares…


Question Description:

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Smart Ltd. was incorporated on 1st August, 2010 with an authorised capital of 5,00,000 equity shares of Rs.10 each to acquire the business of Mr. Smart with effect from 1st April, 2010. The purchase consideration was agreed at Rs.7,00,000 to be satisfied by the issue of 40,000 equity shares of Rs.10 each as fully paid-up and 3,000, 9% debentures of Rs.100 each as fully paid-up. The entries relating to the transfer were not made in the books which were carried on without a break until 31st March, 2011. On 31st March, 2011 the trial balance extracted from the books showed the following: Rs Rs Sales 10, 43,700 Purchases 7,76,580 Advertising 37,800 Postage and Telegram 8,820 Rent and Rates 18,420 Packing Expenses 16,800 Office Expenses 12,540 Opening Stock as on 1.4.2010 1,05,220 Directors‘ fees 20,000 Debenture Interest 18,000 Land and Buildings 3,00,000 Plant and Machinery 1,80,000 Furniture and Fixture 20,000 Sundry Debtors 1,39,500 Cash at Bank 40,000 Cash-in-hand 4,900 Bills Payable 30,000 Sundry Creditors 53,240 Preliminary Expenses 7,360 Smart‘s Capital Account 5, 89,000 Smart‘s Drawings Account 10,000 17,15,940 17,15,940 You are also given the following additional information: (i) Stock on 31st March, 2011 amounted to Rs.98,920. (ii) The average monthly sales for April, May and June were one half of those for the remaining months of the year and the gross profit margin was constant throughout the year. You are required to prepare the Trading and Profit and Loss Account for the year ended 31st March, 2011 and the Balance Sheet of Smart Ltd. as on that date.

Answer

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