Cantilever Ltd was awarded a contract to build an office block in London and work commenced at the site on 1 May 2017.
During the period to 28 February 2018, the expenditure on the contract was as follows:

On 28 February 2018, the materials at the site amounted to £2,164 and there were amounts outstanding for wages £366 and direct expenses £49.

Cantilever Ltd has received on account the sum of £64,170 which represents the amount of Certificate No. 1 issued by the architects in respect of work completed to 28 February 2018, after deducting 10% retention money.
The following relevant information is also available:
(a) The plant and machinery have an effective life of five years, with no residual value; and
(b) The company only takes credit for two-thirds of the profit on work certified.

Required:
(a) Prepare a contract account for the period to 28 February 2018; and
(b) Show your calculation of the profit to be taken to profit and loss in respect of the work covered by Certificate No. 1.

Transcribed Image Text:

Materials issued from stores Materials purchased Direct expenses Wages Charge made by the company for administration expenses Plant and machinery purchased on 1 May 2017, for use at site £ 9,411 28,070 6,149 18,493 2,146 12,180