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Compute a conservative estimate 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 81600 The following was the expenditure on a contract for Rs. 1200000 commenced in January 2010 Materials 240000 Wages 328000 Plant 40000 Overheads 17200 Cash received on account of the contract upto 31st December was Rs.480000 Being 80% of the work certified. The value of materials in hand was Rs.20000. The plant had undergone 20% depreciation. Prepare contract a/c. 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 35000 Materials 105000 Head office exps 12500 Materials costing Rs.10000 proved unsuitable and were sold for Rs.11500 and a part of plant was scrapped and sold for Rs.1700/- Of the contract price Rs.240000 representing 80% of work certified had been received by 31st March,2010 and on that date the value of the plant on the job was Rs.8000 and the value of materials was Rs.3000. The cost of work done bur not credited was Rs.25000. It was decided to (a) Estimate what further expenditure would be incurred in completing the contract, (b) Compute from the estimate and the expenditure already incurred, the total profit that would made on the account and (c) Ascertain the amount of profit to be taken to the credit of Profit and Loss account for the year ending 31-03-2010. While taking profit to the credit of profit & loss a/c, that portion of the total profit should be taken which the value of work certified bears to the contract price. Details of the estimates to complete the contract are given below: (a) That the contract would be completed by 30th Sept 2010. (b) The wages to complete would amount to Rs.84750/(c) That materials in addition to those in stock on 31st March would cost Rs.50000 (d) That further Rs.15000 would have to be spent on plant and the residual value of the plant on 30th Sept would be Rs.6000 (e) The head office 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 Prepare contract account for the year ended 31 March 2010 and show your calculations of the sum to be credited to Profit & Loss a/c for the year.
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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. 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 Qty Rate Actual Qty 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 far as rate is concerned. M Constructions Ltd has taken two contracts on 1st April,2010. The position of contracts on 31st March 2011 is as follows: Details Contract 1 Contract 2 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.

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