Newbild SA commenced work on the construction of a block of flats on 1 July 20X0.

During the period ended 31 March 20X1 contract expenditure was as follows:

€
Materials issued from stores 13,407 Materials delivered direct to site 73,078 Wages 39,498 Administration expenses 3,742 Site expenses 4,693 On 31 March 20X1 there were outstanding amounts for wages 396 and site expenses 122, and the stock of materials on site amounted to 5,467.
The following infor mation is also relevant:
1 On 1 July 20X0 plant was purchased for exclusive use on site at a cost of 15,320. It was estimated that it would be used for two years after which it would have a residual value of 5,000.
2 By 31 March 20X1 Newbild SA had received 114,580, being the amount of work cer tified by the architects up to 31 March 20X1 less a 15% retention.
3 The total contract price is 780,000. The company estimates that additional costs to complete the project will be 490,000. From costing records it is estimated that the costs of rectification and guarantee work will be 2.5% of the contract price.
Required:

(a) Prepare the contract account for the period, together with a statement showing your calculation of the net income to be taken to the company’s income statement on 31 March 20X1.
Assume for the purpose of the question that the contract is sufficiently advanced to allow for the taking of profit.

(b) Give the values which you think should be included in the figures of revenue and cost of sales, in the income statement, and those to be included in net amounts due to or from the customer in the balance sheet in respect of this contract.