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Deepankar Engineers undertook a contract of building construction which commenced on 1/4/2017. The following details are available for the year ending3113/2018. - Cost Accounting(Financial Accounting and Auditing 10)

Deepankar Engineers undertook a contract of building construction which commenced on 1/4/2017. The following details are available for the year ending
3113/2018.
You are required to prepare :
(a) Contract Account for the year ending 31/3/2018, and
(b) Balance-sheet extract as on that date.

Particulars (Rs.) Particulars (Rs.)
Contract price 3,50,000 Direct Wages Paid 40,000
Work certified 1,7,500 Material Returned From site 2,500
Cash received 1,20,000 Plant hire charges 17,500
Materials issued to site 42,000 Indirect Wages 5,000
Planning and Estimating Cost 10,000 Site Office Costs 6,780
Direct Expenses 9,020 Head Office Exps. apportioned 3,750
Work not Certified 1,490    

The contractor's own plant, original cost Rs. 20,000, has been continuously in use for this contract throughout the year. The residual value of the plant after 5 years of life is expected to be Rs. 5,000. Straight line method of depreciation is in use. As on 31/03/2018, outstanding wages amounted to Rs. 27,000 and material at site was estimated at Rs. 20,000.

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Solution

Dr. Books of Deepankar Engineers' Contract Alc
(For the Year Ended 31-3-2018)
Cr.
Particulars (Rs.) Particulars (Rs.)
To Material Issued to Site 42,000 By Work Certified 1,71,500
To Planning & Establishment Cost 10,000 By Work not Certified 1,490
T o Direct Expenses 9,020 By Material Returned from Site 2,500
To Direct Wages Paid 40,000 By Plant at Site 5,000
To Plant Hire Charges 17,500 By Work not Certified 20,000
To Indirect Wages 5,000    
To Site Office Costs 6,780    
To Head Office Expenses Apportioned 3,750    
To Plant 20,000    
To Outstanding Wages 27,000    
To Notional Profit c/d 19,440    
  2,00,490   2,00,490
To Profit and Loss Alc
- (Profit)
9,049 By Notional Profit b/d 19,440
To Stock Reserve 10,391    
  19,440   19,440

Extracts· of Balance Sheet
(For the Year Ended 31-3-2018)

Liabilities (Rs.) Assets   (Rs.)
Profit and Loss Alc 9,049 Material at Site   20,000
Outstanding Wages 27,000 Plant at Site   5,000
    Work-in-Progress :    
    Work Certified 1,71,500  
    (+)Work Uncertified 1,490  
      1,72,990  
    (-) Cash Received 1,20,000  
      52,990  
    (-) Stock Reserve 10,372 42,618

Working Note:
Contract Price=Rs. 3,50,000
Work Certified=Rs. 1,71,500
i.e. More 50%, but less than 90%
`therefore 2/3xx"National profit"xx"Cash Received"/"Work Certified"`

`=2/3xx19400xx120000/171500`

`=2/3xx13574`

= Rs. 9,049 P and L A/c (Profit)

and Rs. 10,391 Stock Reserve [Rs 19,440 - Rs. 9,049]

Concept: Contract Account - Accounting for Plant Used in a Contract
  Is there an error in this question or solution?
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