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: 

- Prepare the contract account 

- Compute the amount of profit or loss to be taken to the main profit and loss account of  the company. 

- Compute the value of work in progress.

Answer rating: 100% (QA)

ALPHA Construction Limited Contract Account Contract No 49 Building a House Contract Price Shs 26500... View the full answer