A You are required to prepare the contract account for the year ended 31 December 2013, and show the calculation of the sum to be credited to profit and loss for that year.

On 1 April 2013 MN Ltd commenced work on a contract which was to be completed by 30 June 2014 at an agreed price of $£ 520,000$.

MN Ltd's financial year ended on 31 December 2013, and on that day expenditure on the contract totalled $£ 263,000$ made up as under:

\begin{tabular}{lr}

& $£$ \\

Plant & 30,000 \\

Waterials & 124,000 \\

Sundry expenses & 95,000 \\

Head office charges & 5,000 \\

& $\underline{9,000}$ \\

\hline

\end{tabular}

Cash totalling $£ 195,000$ had been received by 31 December 2013 representing $75 \%$ of the work certified as completed on that date, but in addition, work costing $£ 30,000$ had been completed but not certified.
A sum of $£ 9,000$ had been obtained on the sale of materials which had cost $£ 8,000$ but which had been found unsuitable. On 31 December 2013 unused materials on site had cost $£ 10,000$ and the plant was valued at $£ 20,000$.
To complete the contract by 30 June 2014 it was estimated that:

(a) the following additional expenditures would be incurred:
\begin{tabular}{lr}
& $£$ \\
Wages & 64,000 \\
Materials & 74,400 \\
Sundry expenses & 9,000 \end{tabular}

(b) further plant costing $£ 25,000$ would be required;

(c) the residual value of all plant used on the contract at 30 June 2014 would be $£ 15,000$;

(d) head office charges to the contract would be at the same annual rate plus $10 \%$.
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 profit and loss, for the year ending 31 December 2013, that proportion of the total profit relating to the work actually certified to that date.
\section*{(Chartered Institute of Management Accountants)}