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Problem 2 Contract Costing

T.K. Construction Ltd. is managing two contracts, A and B, with various financial details provided for each. The document includes the preparation of contract accounts, contractees' accounts, and extracts from the balance sheet as of December 31st, highlighting work-in-progress calculations. Key figures include contract prices, materials used, direct labor, and profit/loss calculations for both contracts.

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charleschirwa05
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98 views4 pages

Problem 2 Contract Costing

T.K. Construction Ltd. is managing two contracts, A and B, with various financial details provided for each. The document includes the preparation of contract accounts, contractees' accounts, and extracts from the balance sheet as of December 31st, highlighting work-in-progress calculations. Key figures include contract prices, materials used, direct labor, and profit/loss calculations for both contracts.

Uploaded by

charleschirwa05
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Problem 2.

T.K. Construction Ltd. is engaged on two contracts A and B during the year. The following particulars are
obtained at the year end (Dec. 31) :

Date of commencement Contract price Materials issued Materials returned Materials on site (Dec. 31st)
Direct labour Direct expneses Establishment expenses Plant installed at cost Value of plant(Dec. 31 st)
Cost of contact not yet certified Value of contract certified Cash received from contractess Architect's
fees

Contract A April I 6,00,000 1,60,000 4,000 22,000 1,50,000 66,000 25,000 80,000 65,000 23,000 4,20,000
3,78,000 2,000

Contract B September I 5,00,000 60,000 2,000 8,000 42,000 35,000 7,000 70,000 64,000 10,000
1,35,000 1,25,000 1,000 During the period, materials amounting to Rs. 9,000 have been transferred
from contract A to contract B. You are required to show: (a) Contract Accounts, (b) Contractees'
Accounts, and (c) Extracts from Balance Sheet as on December 31 st, clearly showing the calculation of
work-in-progress. (B.B.M.. Ba·wgalore)

Solution:

Contract 'A' Account for the year ending 31st Dec ........... .

Particulars

To Materials used To Direct labour To Direct expenses To Establishment expenses To Depreciation on


plant To ArchItect's fees . To Balance cld (Notional Profit)

To P & LAic (1,35,000X~X 8,80,000) 3 1,10,000

To WIP Ale (Reserve)

Rs.

1,60,000 1,50,000 66,000 25,000 15,000 2,000 60,000 4,78,000

Particulars

By Materials returned By Materials transferred to B By Stock of materials By Work-in-Progress : Work


certlficd Work uncertified 4,20,000 23,000

36,000 By Balance bid

24,000

60,000

Rs.
4,000 9,000 22,000

4,43,000

60,000

Contract Costlllg

Contract 'B' Account for the year ending 31st Dec ........... .

Particulars Rs PartIculars

To Materials used 60,000 By Materials returned To Materials from Contract A 9,000 By Stock matenals
To Direct labour 42,000 By Work-m-Progress : To Direct expenses 35,000 Work certified 1,35,000 To
Establishment expenses 7,000 Work uncertified 10,000 To DepreciatIOn on plant 6,000 To Architect's
fees 1,000 By P & L Afc (Loss on contract)

1,60,000

A Contractee's Account

Rs

To Balance cld 3,78,000 31 st Dec. By Cash

1 st Jan. By Balance bid

B Contractee's Account

Rs.

To Balance cld 1,25,000 31 st Dec. By Cash

1 st Jan. By Balance bid

Balance Sheet (Extracts) as on 31st December .................... .

Liahtlitles

Profit on Contract A Less: Loss on Contract B

36,000 5,000

Rs. Assets

Plant 31,000 Less' DepreciatIOn Stock of matenals Contract A Contract B

/Vork-Ill-progress Contract A Work certified Work uncertified

Less : Reserve
Less . Cash received

Work-ill-progress " Contract B Work certified Work uncertified

Less: Cash received

1,50,000 21,000

22,000 8,000

4,20,000 23,000

4,43,000 24,000

4,19,000 3,78,000

1,35,000 10,000

1,45,000 1,25,000

2.15

Rs.

2,000 8,000

1,45,000

5,000

1,60,000

Rs.

3,78,000

3,78,000

Rs

1,25,000

1,25,000

Rs.

1,29,000

30,000
41,000

20,000

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