Reference no: EM132658105
ALPHA Construction limited has been awarded a contract to build a house. This is a contract No 49 for the company and the contract price is Shs.2.65 million. At the end of the company's financial year, the contract was 85% Finished and hence regarded as being near completion. You are also provided with the following information about the contract:
Particulars Shs.
Materials purchased and delivered 580,000
Materials issued from store 60,000
Materials returned to stores 9,000
Site expenses 300,000
Site wages 200,000
Plant sent to site 100,000
Architect's fees 30,000
Plant returned from site 10,000
Subcontractor's fees 105,000
Head Office overheads absorbed 60,000
Valuation at the year ending disclosed the following: Shs
Materials: 19,500
Plant on site 50,000
Work done but not yet certified 60,000
Additional information
a) The portion of the work which was completed during the year and certified by the architect was assessed as representing 75% of the whole contract price. The contractee made payments to this extent less 10% retention money.
b) The management of the company decided for the purpose of preparing the company's annual accounts to make a provision of a third of the notional profit against the possibility of defects and other contingencies arising later in respect of the work already certified for payment.
Required:
Question 1: Prepare the contract account
Question 2: Compute the amount of profit or loss to be taken to the main profit and loss account of the company.
Question 3: Compute the value of work in progress.
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