Compute a conservative estimate of profit of profit on a contract (which has been 80% complete) from the following particulars. Illustrate atleast 4 methods of computing profit.
Total expenditure to date
Rs.85000
Estimated further exps to complete the contract
17000
Contract price
153000
Works certified
100000
Works not certified
8500
Cash received
2.
81600
The following was the expenditure on a contract for Rs. 1200000 c ommenced in January 2010 Materials
240000
Wages
328000
Plant
40000
Overheads
17200 st
Cash received on account of t of the contract upto 31 December was Rs.480000 of the work certified. The value of m of materials in hand was Rs.20000. The plant had Being 80% of t undergone 20% depreciation. Prepare contract a/c.
3.
st
Prabhu builders Ltd. Commenced work on 1 April 2009 on a contract of which the agreed price was st
Rs.5 lakhs. The following expenditure was incurred during the year upto 31 March, 2010. Particulars
Rs.
Wages
140000
Plant Materials Head offi ce exps
35000 105000 12500
of plant was Materials costing Rs.10000 proved unsuitable and were sold for Rs.11500 and a part of pl scrapped and sold for Rs.1700/- O f t f the contract price Rs.240000 representing 80% of work certified st
of the plant on the job was Rs.8000 had been received by 31 March,2010 and on that date the value of t of materials was Rs.3000. The cost of work done bur not credited was Rs.25000. and the value of m
It was decided to (a) Estim ate what further expenditure would be incurred in completing the contract, (b) Compute from the estimate and the expenditure already incurred, the total profit that of profit to be taken to the credit of Profit would made on the account and (c) Ascertain the amount of profit of profit & loss a/c, and Loss account for the year ending 31-03-2010. While taking profit to the credit of profit that portion of t of the total profit should be taken which the value of work certified bears to the contract price. Details of t of the estimates to complete the contract are given below: th
(a) That the contract would be completed by 30 Sept 2010. (b) The wages to complete would amount to Rs.84750/st
(c) That materials in addition to those in stock on 31 March would cost Rs.50000 th
of the plant on 30 (d) That further Rs.15000 would have to be spent on plant and the residual value of t
Sept would be Rs.6000 (e) The head offi ce expenses to the contract would be at the same annual rate as in 2009-10. (f) That claims, temporary maintenance and contingencies would require Rs.9000 st
of the sum Prepare contract account for the year ended 31 March 2010 and show your calculations of t to be credited to Profit & Loss a/c for the year.
4.
st
th
Delux Ltd undertook a contract for Rs.500000 on 1 July 2009. On 30 June 2010, when the accounts were closed, the following details about the contract were gathered: Materials purchased
100000
Wages paid
45000
General expenses
10000
Plant purchased
50000
Materials on hand 30-6-2010
25000
Wages Accrued 30-6-2011
5000
Work certified
200000
Cash received
150000
Work uncertified
15000
Depreciation on plant
5000
The above contract contained an escalation clause which read as follows: In the event of prices of materials and rates of wages increase by more than 5% the contract price would be increased accordingly by 25% of the rise in the cost of materials and wages beyond 5% in each case It was found that since the date of signing the agreement the prices of materials and wage rates increased by 25%. The value of work certified does nit take into account the effect of the above
clause. Prepare the contract account. 5.
The escalation clause of a long term contract stipulates the following quantities and rates of materials A, B, C and following number of labour hours X,Y, and Z and their rates of pay. The actuals are shown below: Materials
Q ty
Rate
Actual Q ty
Actual rate
A
500
50
750
45
B
1000
30
900
35
C
20
1000
21
1010
Labour
Hours
Hrly rate
Actual hrs
Actual rate
X
4800
2.00
4500
2.25
Y
2400
1.00
3000
1.50
Z
9600
1.50
10000
1.50
Compute the amount of the final claim so f ar as rate is concerned.
6.
M Constructions Ltd has taken two contracts on 1st April,2010. The position of contracts on 31st March 2011 is as follows: Contract 1 Contract 2 Details Contract price 2700000 6000000 Materials 580000 1080000 Wages paid 1124000 1650000 Other expenses 28000 60000 Plant at site 200000 350000 Unused materials at site 40000 60000 Wages payable 36000 54000 Other expenses due 4000 9000 Work certified 1600000 3000000 Cash received 1200000 2250000 Work completed but not yet certified 80000 90000 The plant at site is to be depreciated at 10%. Prepare the contract accounts in respect of each contract showing the nominal profit and also profit to be transferred to profit and loss account.
