Cantilever Ltd was awarded a contract to build an office block in London and work commenced at the site on 1 May 20X5.

During the period to 28 February 20X6, the expenditure on the contract was as follows:

On 28 February 20X6, the stock of 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 20X6, after deducting 10 per cent retention money.

The following relevant information is also available:

(a) The plant and machinery has 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 20X6, and

(b) Show your calculation of the profit to be taken to the credit of the company’s profit and loss account 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 20X5, for use at site £ 9,411 28,070 6,149 18,493 2,146 12,180