- 20 Marks
MI – Nov 2020 – L1 – SB – Q2 – Costing Methods
Prepare the contract account for “Recoverable 777” with materials, plants, and other expenses involved in the contract.
Question
Recoverable Limited is into construction, and the following information relates to one of its contracts, code-named “Recoverable 777” as at the end of the first year. It is the company’s policy to take the difference between the value of work certified and the cost of work certified as profit for the year:
| Description | N |
|---|---|
| Materials purchased directly to site | 3,450,000 |
| Materials purchased directly to site but not yet paid | 1,300,000 |
| Materials transferred to site | 5,650,000 |
| Materials transferred out of site | 720,000 |
| Plants purchased for contract | 15,000,000 |
| Plant transferred to site | 5,000,000 |
| Payment of sub-contractor | 4,500,000 |
| Insurance (effective 2 months after commencement of contract) | 600,000 |
| Salary | 7,500,000 |
| Salary due but not paid | 2,000,000 |
| Other site expenses | 1,905,000 |
| Head office charges | 500,000 |
| Value of work certified | 36,500,000 |
| Contract value | 50,000,000 |
| Payment received | 33,800,000 |
| Value of material on site at end of year | 850,000 |
| Value of plant 1 c/d | 12,000,000 |
| Value of plant 2 c/d | 4,000,000 |
Required:
Record the contract account for “Recoverable 777”. (Total 20 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: Construction Accounting, Contract Accounts, Material Transfer, Work certified
- Level: Level 1
- Topic: Costing Methods
- Series: NOV 2020
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