Deluxe Limited undertook a contract for Rs 5,00,000 on 1st July 1997. On 30th June 1998 when the accounts were closed, the following details about the contract were gathered:

Rs Rs Materials purchased 1,00,000 Wages accrued 30-06-1998 5,000 Wages paid 45,000 Work certified 2,00,000 General expenses 10,000 Cash received 1,50,000 Plant purchased 50,000 Work uncertified 15,000 Materials on hand 30-06-1998 25,000 Depreciation of plant 5,000 The above contract contained an escalation clause, which read as follows:

“In the event of prices of materials and rates of wages increase by more than 5% the contract price would be increased accordingly by 25% of the raise 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 wages rates increased by 25%. The value of the work does not take into account the effect of the above clause.

Prepare the contract account working should form part of the answer.