Question

The Following information relates to contract #102,which was undertaken for the construction of a railway bridge for the Kampton Council.The Value of the contract is $250000 and it is at a stage where profits can be attributed to it.Details of the contract are shown in the books:

                                                                                                                                                     $

                                                                            Materials sent to site                                        85349

                                                                           Labour engaged on site                                      74375

                                                                         Plant installed at cost                                           15000

                                                                         Direct expenditure                                                  4136

                                                                         General Overhead Charges                                      3167

                                                                          Materials returned to store                                      549

                                                                          Work certified                                                       195000

                                                                          Cost of Work not certified                                       4500

                                                                          Materials on hand,December 31                            1883

                                                                          Wages accrued on December 31                           2400

                                                                          Direct Expenditure                                                240

                                                                          Value of Plant December 31                                  11000

Cash has been received from the contractee,amounting to $180000

Required: (i)contract Account

              (ii) profit and loss account

              (iii)contractee accounts

Answer 1

PART (i):

Contract #102 Account for the year ending 31st Dec.

Particulars	Amount	Particulars	Amount
To Materials sent to site	85349	By Materials (Return to store)	549
To Labour	74375	By Material in Hand	1883
To Plant at site	15000	By Plant at Site	11000
To Direct expenses	3167	By Work In Progress Work Certified- 195000 Work Uncertified- 4500	199500
To Establishment charges	4136
To Wages Accrued	2400
To Direct Expenses Accrued	240
To NOTIONAL PROFIT C/D	28265
	212932		212932
To Profit And Loss Account (Refer W.N. 1)	17394	By NOTIONAL PROFIT B/D	28265
To Balance C/D(RESERVE)	10871

W.N. 1

Proportion of profit transferred to Profit and Loss Account has been calculated by the following formula:

Notional profit × 2/3 × Cash received/Work certified

28,265 × 2/3 × 180000/195000 = 17,400

PART (ii):

Profit and Loss Account

Particulars	Amount	Particulars	Amount
		By #102 Contract Account	17394

PART (iii)

#102 Contractee’s Account

Particulars	Amount	Particulars	Amount
To Balance C/D	180000	By Cash	180000
	180000		180000