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During its financial year ended 30 June 20x7 Beavers Ltd, an engineering company, has worked on several contracts. Information relating to one of them is given below.
Contract X201
Date Commenced
1 July 20X6
Estimated Completion Date
30 Sept 20X7
Contract Price
RO 240,000
Proportion of work certified as satisfactorily completed (and invoiced) up to June 20X7
RO 180,000
Amount received from contractee
RO 150,000
Costs up to 30 June 20X7
Wages
RO 91,000
Material sent to site
RO 36,000
Other contract costs
RO 18,000
Proportion of head office costs
RO 6,000
Plant and equipment transferred to the site (at book value on 1 July 20X6)
RO 9,000
The plant and equipment is expected to have a book value of about RO 1,000 when the contract is completed.
Stock of materials at site on 30 June 20X7
RO 3,000
Expected additional costs to complete the contract
RO 10,000
Materials (including stock at 30 June 20X7)
RO 12,000
Other (including head office costs)
RO 8,000
Company policy is to recognize profit on contracts as follows
Profit to be recognized = {Value of work certified / Total contract value} x Estimated total
Contract Profit
a) Prepare the Contract account.
b) The profit to be recognized on the Contract to date.
c) The amount to be shown on the company balance sheet as at 30 june 20X7 in respect on Contract X201 are:
a. Stocks
b. Debtors
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