You are required to prepare the contract account for the year ended 31 December 19X0, and show
Question:
You are required to prepare the contract account for the year ended 31 December 19X0, and show the calculation of the sum to be credited to the profit and loss account for that year.
On 1 April 19X0 MN Ltd commenced work on a contract which was to be completed by 30 June 19X1 at an agreed price of £520,000.
MN Ltd’s financial year ended on 31 December 19X0, and on that day expenditure on the contract totalled £263,000 made up as under:
It was estimated that the contract would be completed on time but that a contingency provision of £15,000 should be made. From this estimate and the expenditure already incurred, it was decided to estimate the total profit that would be made on the contract and to take to the credit of the profit and loss account for the year ended 31 December 19X0, that proportion of the total profit relating to the work actually certified to that date.
Step by Step Answer: