A Rowlock Ltd was incorporated on 1 October 2011 to acquire Rowlock's mail order business, with effect from 1 June 2011.

The purchase consideration was agreed at $£ 35,000$ to be satisfied by the issue on 1 December 2011 to Rowlock or his nominee of 20,000 ordinary shares of $£ 1$ each, fully paid, and $£ 15,0007 \%$ loan notes.

The entries relating to the transfer were not made in the books which were carried on without a break until 31 May 2012.

On 31 May 2012 the trial balance extracted from the books is:

\begin{tabular}{|c|c|c|}

\hline Sales & $£$ & \begin{tabular}{c}

$£$ \\

52,185

\end{tabular} \\

\hline Purchases & 38,829 & \\

\hline Wrapping & 840 & \\

\hline Postage & 441 & \\

\hline Warehouse rent and rates & 921 & \\

\hline Packing expenses & 1,890 & \\

\hline Office expenses & 627 & \\

\hline Inventory on 31 May 2011 & 5,261 & \\

\hline Director's salary & 1,000 & \\

\hline Loan note interest (gross) & 525 & \\

\hline Non-current assets & 25,000 & \\

\hline Current assets (other than inventory) & 9,745 & \\

\hline Current liabilities & & 4,162 \\

\hline Formation expenses & 218 & \\

\hline Capital account - Rowlock, 31 May 2011 & & 29,450 \\

\hline \multirow[t]{2}{*}{ Drawings account - Rowlock, 31 May 2011} & 500 & \\

\hline & $\underline{85,797}$ & $\underline{85,797}$ \\

\hline

\end{tabular}

You also ascertain the following:

1 Inventory on 31 May 2012 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 was constant throughout the year.

3 Wrapping, postage and packing expenses varied in direct proportion to sales, whilst office expenses were constant each month.
4 Formation expenses are to be written off.
You are required to prepare the income statement for the year ending 31 May 2012 apportioned between the periods before and after incorporation, and the statement of financial position as at that date.
(Chartered Institute of Management Accountants)