Q1. A firm of builders,
carrying out large contracts, kept in a contract ledger, separate accounts for
each contract. On 30th June, 2009 the following was shown as being
the expenditure in connection with Contract No. 777.
|
Particulars
|
Rupees
|
|
Materials
Purchased
|
58,063
|
|
Materials
from stores
|
9,785
|
|
Plant which
had been used on other contracts
|
12,523
|
|
Additional Plant
purchased
|
3,610
|
|
Wages
|
73,634
|
|
Direct
Expenses
|
2,026
|
|
Proportion of
establishment charges
|
8,720
|
The contract, which had commenced on 1st
January, 2009 was for Rs 3,00,000 and the amount certified by the architect,
after deduction of 20 percent retention money was Rs 1,20,800, the work being
certified to 30th June, 2009. The materials on the site at that date
was valued at Rs 9,858. A contract plant ledger was also kept, in which
depreciation was dealt with monthly, the amount debited in respect of plant on
Contract 777 to 30th June, 2009 was Rs 1,130.
You are requested to prepare an
account showing the profit on the contract to 30th June, 2009.
Q2. M/s Gem Builders, having
undertaken a contract at a price of Rs 3,00,000 started the work on 1st
January, 2008. Prepare Contract Account for the year ended on 31st
December, 2008 from the following particulars:
|
Particulars
|
Rupees
|
|
Materials
|
85,624
|
|
Plant
installed at site
|
15,000
|
|
Labour
|
74,375
|
|
Sundry Direct Expenses
|
3,293
|
|
Materials at
site on 31st December, 2008
|
1,883
|
|
Materials
returned to stores
|
549
|
|
Cash received
(90% of work certified)
|
1,80,000
|
|
Work
uncertified
|
4,500
|
|
Establishment
charges allocated to contract
|
4,000
|
|
Wages due on
31.12.2008
|
2,640
|
|
Value of
Plant at site on 31.12.2008
|
11,000
|
Show your calculation of the amount of
profit to be transferred to Profit & Loss Account and explain the basis of
your calculation.
Q3. Pallavi Construction Ltd.
engaged on two contracts A and B. From their books of account the following
particulars are obtained in respect of the year 2008:
Particulars
|
Contract
A
|
Contract B
|
Contract Price
|
18,00,000
|
15,00,000
|
|
Materials Purchased
|
4,80,000
|
1,80,000
|
Wages Paid
|
4,20,000
|
1,05,000
|
|
Materials returned
|
12,000
|
6,000
|
|
Direct Expenses
|
1,80,000
|
90,000
|
Establishment
charges
|
81,000
|
24,000
|
Plant installed
|
2,40,000
|
2,10,000
|
|
Accrued wages upto 31st
December, 2008
|
48,000
|
36,000
|
|
Materials on site on 31st
December, 2008
|
66,000
|
24,000
|
|
Work Certified
|
12,60,000
|
4,05,000
|
|
Cash Received
|
11,34,000
|
3,75,000
|
|
Plant valued on 31st
December, 2008
|
1,95,000
|
1,92,000
|
|
Uncertified Work
|
69,000
|
30,000
|
On 25th September, 2008,
materials costing Rs 27,000 have been transferred to Contract B from Contract
A. You are required to show:
a.
Contract
Account
b.
Contractee’s
Account
c.
Balance
Sheet presentations of Contract items
Q4. Jim commenced business as
Builder and invested Rs 5,00,000 in capital equipment. He undertook contract
for Rs 1,00,00,000 to be completed in three years. He was paid 90% of the value
of work certified by the architect immediately and balance was to be paid on
completion of the contract. The Architect’s certificates were for Rs 30,00,000
during the first year, Rs 50,00,000 during the second year and Rs 20,00,000 in
the third year respectively.
Jim was duly paid in
accordance with the terms of contract and his capital equipments were valued at
the end at Rs 3,80,000 on which depreciation was calculated on straight-line
method in two years at 8%. The records showed the following:
|
|
Year
1
|
Year
2
|
Year 3
|
Particulars
|
Rupees
|
Rupees
|
Rupees
|
|
Materials
|
12,70,000
|
25,00,000
|
5,00,000
|
|
Wages
|
15,00,000
|
20,00,000
|
8,00,000
|
Carriage
|
60,000
|
1,50,000
|
1,50,000
|
|
Miscellaneous Expenses
|
30,000
|
20,000
|
8,000
|
|
Incomplete work at the
end
|
4,00,000
|
4,00,000
|
Nil
|
Stock transferred
to stores at the end
|
Nil
|
Nil
|
50,000
|
You are required to prepare Contract
Account in the books for three years. Also show Contractee’s Account.
Q5. The following information
relates to building contract for Rs 10,00,000.
Particulars
|
2007
|
2008
|
|
|
Rupees
|
Rupees
|
|
Materials issued
|
3,00,000
|
84,000
|
Direct Wages
|
2,30,000
|
1,05,000
|
|
Direct Expenses
|
22,000
|
10,000
|
|
Indirect Expenses
|
6,000
|
1,400
|
Work Certified
|
7,50,000
|
10,00,000
|
Work Uncertified
|
8,000
|
|
|
Materials at site
|
5,000
|
7,000
|
|
Plant issued
|
14,000
|
2,000
|
Cash received
from contractee
|
6,00,000
|
10,00,000
|
The values of plant at the end of 2007
and 2008 were Rs 7,000 and Rs 5,000 respectively.
Prepare:
i.
Contract
Account
ii.
Contractee’s
Account for two years 2007 & 2008 taking into consideration such profit for
transfer to profit & loss account as you think proper
iii.
Work-in-progress
account and
iv.
Balance
Sheet presentations of contract items
Q6. Sky Building Contractors
obtained a contract to build a bungalow at a contract price of Rs 35,00,000.
The contractors agree to pay 90% of the value of the work done as certified by
the architect immediately on receipt of the certificate and to pay the balance
in 2 years after the completion of the contract. Contractors commenced work on
1st May, 2006. A machine costing Rs 50,000 was specially brought and
used for the contract. The value of the machine at the end of 2006 and 2007 and
on completion of the contract at the end of 2008 was Rs 40,000, Rs 25,000 and
Rs 10,000 respectively. The work done and certified by the architect at the end
of 2006 and 2007 was Rs 8,75,000 and Rs 28, 25,000 respectively. Work costing
Rs 50,000 done at the end of 2007 was not certified as on that date. The
expenses on the contract were as under:
|
|
2006
|
2007
|
2008
|
Particulars
|
Rupees
|
Rupees
|
Rupees
|
|
Materials
|
4,50,000
|
5,50,000
|
3,15,000
|
|
Wages
|
4,25,000
|
5,75,000
|
4,25,000
|
|
Direct Expenses
|
17,500
|
62,500
|
22,500
|
|
Indirect Expenses
|
7,500
|
10,000
|
Nil
|
Prepare the contract account of Sky
Building Contractors for all the three years, 2006, 2007 and 2008 and show the
relevant figures in the Balance Sheet as at the end of the three years.
Q7. The following Trial
Balance was extracted from the books of Jumbo Contractors as on 31st
December, 2008:
Particulars
|
Rupees
|
Rupees
|
Contractee’s
Account
|
|
3,00,000
|
|
Buildings
|
1,00,000
|
|
Creditors
|
|
62,000
|
|
Bank
|
35,000
|
|
|
Capital
account
|
|
3,00,000
|
Materials
|
1,00,000
|
|
Wages
|
70,000
|
|
|
Expenses
|
37,000
|
|
Plant
|
2,50,000
|
|
|
Work-in-progress
(Contract No. 837) 1.1.2008
|
1,00,000
|
|
|
Unadjusted Profit(Contract
No. 837)
|
|
30,000
|
Total
|
6,92,000
|
6,92,000
|
Contract No. 837 which was in progress
on 1st January, 2008 was completed on 31st March, 2008.
Contract No. 838 commenced on 1st January, 2008.
Rs 20,000 materials and Rs 10,000 wages were paid for
contract no. 837. Rs 60,000 materials were sent to contract no. 838 site but Rs
3,000 worth was lost there by accident. Rs 60,000 wages paid for contract 838.
Rs 50,000 plant was used on contract no. 838 all through but plant costing Rs
2,00,000 was used on contract no. 837 and thereafter it was sent to contract
no. 838. Materials worth Rs 4,000 were on site on contract no. 838 at the end
of the year. Provide 10% depreciation on Plant and 2% on Buildings.
Contract No. 837 was for Rs 1,50,000
and certified work upto last year was Rs 1,00,000. The work has been certified
upto the full extent but payment has been received upto 80% of the certified
amount. The balance has not been paid yet nor has any entry been passed, on
completion of the contract.
Expenses are charged to contracts on the basis of 50% of
direct wages. The new contract is for Rs 4,00,000, 90% is paid on
certification. The uncertified work of contracts as on 31st
December, 2008 is estimated at Rs 15,000.
You are required to prepare:
a.
Contract
No. 837 Account
b.
Contract
No. 838 Account
c.
Profit
& Loss Account for 2007
d.
Contract
No. 837 Contractee Account
e.
Contract
No. 838 Contractee Account
f.
Balance
Sheet as on 31st December, 2008
Q8. The following Trial
Balance was extracted as on 31st December, 2008 from the books of
Eros Contractors:
Particulars
|
Rupees
|
Rupees
|
Share Capital:
Share of Rs 10 each
|
|
3,51,800
|
P&L a/c on 1st
January, 2008
|
|
25,000
|
|
Provision for
depreciation on Machinery
|
|
63,000
|
Cash received on
account of Contract 107
|
|
12,80,000
|
|
Creditors
|
|
81,200
|
Land &
Buildings (at Cost)
|
74,000
|
|
Machinery (at
Cost)
|
52,000
|
|
|
Bank
|
45,000
|
|
|
Contract 107:
|
|
|
Materials
|
6,00,000
|
|
Direct Labour
|
8,30,000
|
|
|
Expenses
|
40,000
|
|
Machinery on site
(at cost)
|
1,60,000
|
|
Total
|
18,01,000
|
18,01,000
|
Contract 107 was started on 1st
January, 2008. The contract price was Rs 24,00,000 and the customer has so far
paid Rs 12,80,000 being 80% of the work certified.
The cost of the work done since certification was
estimated at Rs 16,000.
On 31st December, 2008
after the above Trial Balance was extracted, machinery costing Rs 42,000 was
returned to stores and material then on site were valued at Rs 27,000.
Provision is required to be made for direct labour due Rs
6,000 and for depreciation of all machinery at 12.50% on cost.
You are required to prepare:
a.
The
Contract Account for Contract 107, giving a statement of profit, if any, to be
properly credited to Profit & Loss Account for 2008
b.
General
profit & Loss Account, and
c.
The
Balance Sheet of Eros Contractors as on 31st December, 2008
Q9. A contractor secured a
contract to supply and erect machinery for the sum of Rs 7,50,000. He was to
receive payments on account form time to time equal to 90% of the certified
value if the work done. He commenced work on 1st January, 2008 and
incurred the following expenditure during the year.
Plant & Tools Rs 70,000; Machinery and Stores Rs
2,00,000; Wages Rs 1,50,000; Sundry
Expenses Rs 30,000; Establishment Expenses RS 40,000.
A part of the machinery costing Rs
20,000 was unsuited to the contract and was immediately sold at a profit of Rs
5,000.
The value of Plant and Tools on 31st December,
2008 was Rs 40,000 and the value of Machinery and Stores then in hand Rs
30,000.
By 31st January, 2009 he
had received payments on account to Rs 4,38,750 being 90% pf the certified
value of work done upto 31st December, 2008
In order to calculate the
profit made on the contract upto 31st December, 2008 the contractor
estimated the further expenditure that would be incurred in completing the
contract and took to the credit of Profit & Loss Account for the year that
proportion of the estimated net profit to be realised on contract which the
certified value of the work done bore to the contract price. He estimated that:
a.
The
contract would be completed in a further period of six months.
b.
Plant
and tools would have a residual value of Rs 10,000 upon the completion of the
contract.
c.
The
cost of machinery & stores required in addition to those in stock on 31st
December, 2008 would be Rs 1,00,000 and that further sundry expenses of Rs
20,000 would be incurred.
d.
The
wages on the contract for the six months to 30th June, 2009 would
amount to Rs 80,000.
e.
The
establishment would cost the same sum per month as in the previous year.
f.
2.50%
of the total cost of the contract (excluding this percentage) should be
provided for contingencies.
Prepare the Contract Account for the
year ended 31st December, 2008 and show your calculations of the
profit to be credited to the Profit & Loss Account for the year.
Q10. Uddan Constructors Pvt.
Ltd. provides you the following information:
a.
The
project commenced on 1st September 2007 and it was estimated to be
completed by 31st March, 2009.
b.
The
contract price was negotiated at Rs 680 lacs.
c.
The
actual expenditure upto 31st March, 2008 and subsequent additional
estimated expenditure upto 31st March, 2009 is furnished as under:
Particulars
|
Actual Expenditure during 1-9-2007 upto 31-3-2008
(Rs)
|
Estimated
Additional Expenditure during
1-4-2008 upto 31-3-2009
(Rs)
|
Direct Material
|
1,95,60,000
|
1,27,40,000
|
|
Indirect
Material
|
14,23,000
|
11,77,000
|
Direct Wages
|
42,46,500
|
41,33,500
|
|
Supervision
Charges
|
4,14,400
|
5,55,600
|
Architect Fees
|
8,17,500
|
12,82,500
|
Construction
Overheads
|
31,52,600
|
21,47,400
|
|
Administrative Overheads
|
14,16,000
|
24,34,000
|
|
Closing Material at site
|
7,50,000
|
-
|
Work Uncertified
at the end of the year
|
13,80,000
|
-
|
Work certified
during the year
|
3,50,00,000
|
3,30,00,000
|
The value of Plant and
Machinery sent to site was Rs 60 lacs, whereas the scrap value of the plant and
machinery at the end of the project was estimated to be Rs 3 lacs.
It was
decided that the profit to be taken credit for should be that proportion of the
estimated net profit to be realised on completion of the project which the
certified value of work as on 31-3-2008
bears to the total contract price. You are required to prepare Contract Account
for the period 31st March, 2008 along with the working of profit to
be taken credit for.
Q11. A firm tendered for a
contract putting in a tender price of Rs 25,00,000. After mutual discussions
the price was reduced by 20% and the firm started work on the contract on
1-1-2008
The following information
is available for the year ending 31st December, 2008:
|
Particulars
|
Rupees
|
|
Materials
purchased for contract
|
5,00,000
|
|
Stores &
spares consumed
|
45,000
|
|
Wages
|
2,64,000
|
|
Plant and Machinery
|
1,20,000
|
|
Overhead
Expenses
|
51,000
|
|
Stock of
materials on 31.12.2008
|
25,000
|
The machinery was purchased
on 1st April, 2008. It has a working life of five years and its
scrap value has been estimated at Rs 20,000. By 31st December, 2008
the contractor had received Rs 8,00,000 which represented 80% of the value of
work certified on 15th December, 2008.
Expenses
incurred after 15th December, 2008 upto31st December, 2008
were;
i. Materials Rs 12,000 ii. Wages Rs 11,000 iii. Overheads Expenses Rs 7,000
Prepare
Contract Account showing the calculation of the profit, if any, to be taken
credit for.
Q12. Deluxe Ltd. undertook a
contract for Rs 5,00,000 on 1st July, 2008. On 30th June
2009 when the accounts were closed the following details about the contract
were gathered:
|
Particulars
|
Rupees
|
|
Materials
purchased
|
1,00,000
|
|
Wages paid
|
45,000
|
|
General
Expenses
|
10,000
|
|
Plant purchased
|
50,000
|
|
Material on
hand 30.6.2009
|
25,000
|
|
Wages accrued
on 30.6.2009
|
5,000
|
|
Work
Certified
|
2,00,000
|
|
Cash Received
|
1,50,000
|
|
Work
Uncertified
|
15,000
|
|
Depreciation
of Plant
|
5,000
|
The
above contract contained and escalation clause which read as follows:
“In the event of prices of
materials and rates of wages increased 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 the work certified does not take into
account the effect of the above clause.
Prepare the Contract
Account. Workings should form part of your answer.
Q13. A construction company has
undertaken to construct a small bridge. The following particulars related to
this bridge for the year ended 31st December, 2008:
|
Particulars
|
Rupees
|
|
Materials:
Direct Purchases
|
1,00,000
|
|
Issued from Stores
|
25,000
|
|
Wages
|
80,000
|
|
General Plant
in use: Written Down Value
|
100,000
|
|
Depreciation thereon
|
10,000
|
|
Direct
Expenses
|
6,000
|
|
Share of
General Overhead
|
3,000
|
|
Materials on
hand at 31st December, 2008
|
4,000
|
|
Materials
lost by fire
|
2,000
|
|
Materials
sold
|
5,000
|
|
Value of work
certified
|
3,00,000
|
|
Cost of
uncertified work
|
6,000
|
The value of the contract
is Rs 5,00,000 and it is practice of the contractee as per terms of the
contract to retain 10% of the work certified.
From the
above particulars prepare the Contract Account, and also show how the relevant
items would appear in the Balance Sheet as on 31st December, 2008.
Q14. Pranlal Engineering
Company undertakes long term contracts which involves the fabrication of
prestressed concrete blocks and the erection of the same on consumers site.
The following information
is supplied regarding the contract which is incomplete on 31st
March, 2009.
|
Particulars
|
Rupees
|
|
Costs
Incurred:
|
|
|
Fabrication
costs to date:
|
|
|
Direct
Materials
|
2,80,000
|
|
Direct Labour
|
90,000
|
|
Direct
Overheads
|
75,000
|
Total
|
4,45,000
|
|
Erection costs to date
|
15,000
|
Total
|
4,60,000
|
|
Contract
Price
|
8,19,000
|
|
Cash received
on account
|
6,00,000
|
Technical estimate of work
completed to date is as follows:
Fabrication: Direct Materials 80%
Direct Labour and
Overheads 75%
Erection 25%
You are required to prepare
a statement for submission to the management indicating:
a.
The
estimated profit on the completion of the Contract; and
b.
The
estimated profit to date on the Contract
Q15. The following particulars
are obtained from the books of Veena Construction Ltd. as on 31st
March, 2009.
Plant and
Equipment at cost Rs
4,90,000
Vehicles at cost
Rs 2,00,000
Details of contract which
remain incomplete as on 31.3.2009
|
|
V-29
|
V-24
|
V-25
|
Particulars
|
Rs
(lacs)
|
Rs (lacs)
|
Rs (lacs)
|
|
Estimate final sales
values
|
8.00
|
5.60
|
16.00
|
|
Estimate final cost
|
6.40
|
7.00
|
12.00
|
|
|
1.60
|
(-)1.40
|
4.00
|
|
Wages
|
2.40
|
2.00
|
1.20
|
|
Materials
|
1.00
|
1.10
|
0.44
|
|
Overheads (excluding
depreciation)
|
1.44
|
1.46
|
0.58
|
|
Total cost to date
|
4.84
|
4.56
|
2.22
|
|
Value certified by
architects
|
7.20
|
4.20
|
2.40
|
|
Progress payments
received
|
5.00
|
3.20
|
2.00
|
Depreciation of Plant and
Equipment and Vehicles should be charged at 20% to the three contracts in
proportion to work certified.
You are required to prepare
statements showing contract-wise and total
i.
Profit
/ Loss to be taken to the P&L Account for the year ended 31st
March, 2009
ii.
Work-in-Progress
as would appear in the Balance Sheet as on 31st March, 2009
Q16. A railway contractor makes
up his accounts to 31st March. Contract No. SER/15 for construction
of a culvert between Bandra and Khar Road commenced on 1st July, 2008.
The costing records yield the following particulars as on 31st
March, 2008
|
Particulars
|
Rupees
|
|
Materials
charged to site
|
31,540
|
|
Labour
|
75,300
|
|
Foreman
|
11,700
|
A machine costing Rs 25,000
has been on site for 73 days. Its working life is estimated at five years and
its final scrap value at Rs 1,000.
A supervisor, who is paid Rs 18,000
p.a, has spent approximately six months on this contract.
All other expenses and
administration cost amounted to Rs 17,000.
Materials in store at site at the end
of the year cost Rs 2,500
The contract price is Rs
3,00,000. At the end of the year two thirds of the contract was completed for
which amount, the Architects certificate has been issued and Rs 1,60,000 has so
far been received on account.
It was decided that the profit made on
the contract in the year should be arrived at by deducting the cost of work
certified from the total value of the architects certificate, that ⅓ of the
profit so arrived at should be regarded as provision against contingencies and
that such provision should be increased by taking in the credit of profit &
loss account only such portion of the ⅔ profit as the cash received bore to the
work certified.
Prepare a contract account
showing profit or loss to be included in respect of this contract in the
financial accounts to 31st March, 2009.
Q17. M/s Hind Corporation
undertook a contract for erecting a sewerage treatment plant for Mumbai Municipality
for a total value of Rs 24,00,000. It was estimated that the job would be
completed by 31st January, 2009.
You are
required to prepare the contract account for the year ending 31st
January, 2009 from the following particulars:
i.
Materials Rs 3,00,000
ii.
Wages
Rs 6,00,000
iii.
Overhead Charges Rs 1,20,000
iv.
Special Plant Rs 2,00,000
v.
Work certified was for Rs 15,00,000 and
80% of the same was received in cash.
vi.
Materials lying on site as on 31.1.2009 Rs
40,000
vii.
Depreciate
plant by 10%
viii.
5%
of the value of material issued and 6% of wages may be taken to have incurred
for the portion of work completed but not yet certified. Overheads are charged
as a percentage of direct wages
ix.
Ignore
depreciation of plant for use of uncertified portion of work
x.
Fine
of Rs 10,000 is likely to be imposed for late completion of the contract.
xi.
Ascertain
the amount to be transferred to Profit and Loss Account on the basis of
realised profit.
Q18. In 2008 UK contractors
Ltd. undertook three contacts one on 1st January, one on 1st
July and one on 1st October. On 31st December, when their
accounts were made up the position was as follows:
|
|
Contract
1
|
Contract
2
|
Contract
3
|
Particulars
|
Rupees
|
Rupees
|
Rupees
|
|
Contract Price
|
2,00,000
|
1,35,000
|
1,50,000
|
|
Expenditure:
|
|
|
|
|
Materials
|
36,000
|
29,000
|
10,000
|
|
Wages
|
55,000
|
56,200
|
7,000
|
|
General expenses
|
2,000
|
1,400
|
500
|
|
Plant installed
|
10,000
|
8,000
|
6,000
|
|
Materials on hand
|
2,000
|
2,000
|
1,000
|
|
Wages Accrued
|
1,700
|
1,800
|
800
|
|
General expenses accrued
|
300
|
200
|
100
|
|
Work certified
|
1,00,000
|
80,000
|
18,000
|
|
Cash received in respect
thereof
|
75,000
|
60,000
|
13,500
|
|
Work finished but
uncertified
|
3,000
|
4,000
|
1,050
|
The plant
was installed on the dates of the contracts and depreciation is taken at 10%
p.a. Prepare the respective accounts in the Contract Ledger and give suitable
entries in the Company’s Balance Sheet.
