From the following information, prepare a Contract Account for the year 2014-15:
Contract Price 75,00,000; Materials Purchased * 80,000: Materials issued from store * 70,000; Payment to Labour
330,000; Direct expenses 740,000; Indirect expenses 75.000; Cost received being 80% of work certified * 2,00,000;
Work uncertified 7 40,000; Materials returned to store 4,000; Materials at site *3,000; Outstanding wages 35,000;
Materials destroyed by fire 4,000.
The construction of building was started on 1st April, 2014. Plant costing 7 40,000 was issued to contract on 1st
June, 2014. On 30-11-2014, plant costing + 2,000 was transferred to other contract. Plant costing * 1,000 was lost
by theft and of 7 500 was destroyed by fire. Plant costing * 2,000 was sold for * 2.200. Depreciation of plant is
charged each year @ 10% p.a.
Ans. Total Profit 68,025 ; Profit to P & L A/C 736,280; Total of Contract Account *3,38,225.
Answers
Answer:
Calculate the goodwill of firm on the basis of years purchase of the weighted average profit of the last four year. The appropriate weight to be used and profits are:
Year 2014-15 2015-16 2016-17 2017-18
Profit(Rs) 1,01,000 1,24,000 1,00,000 1,40,000
Weight 1 2 3 4
On a scrunity of the accounts, the following matters are revealed:
(i) On 1
st
December,2016 a major repair was made in respect of the plant incurring Rs. 30,000 which was charged to revenue. The said sum is agreed to be capitalised for calculation subject to adjustment of depreciation of 10% p.a. on reducing balance method.
(ii) The closing stock for the year 2015-16 was overvalued by Rs. 12,000
(iii) To cover management cost, an annual charge of Rs. 24,000 should be made for the purpose of goodwill valuation.
(iv) On 1
st
April, 2015, a machine having a book value of Rs. 10,000 was sold for Rs. 11,000 but the proceeds were wrongly credited to Profit & Loss. Account. No affect has been given to rectify the same. Depreciation is charged on machine @10% p.a. on reducing balance method.