- 20 Marks
Question
Segelu Nigeria Limited is a construction company located in Bukuai Local Government. The company commenced the construction of a health centre building on 3 January, 2018 for a contract price of N30,000,000 with completion date of February 2019. Estimated cost of the contract was N21,000,000. The construction company’s financial year end was 30 September 2018, with the following balances extracted from the books of accounts on that date.
| Description | Amount (N) |
|---|---|
| Materials issued to site | 3,220,000 |
| Materials returned from site | 250,000 |
| Wages of workers paid | 1,250,000 |
| Own plant in use on site (at cost) | 2,200,000 |
| Plant hire and scaffolding | 1,050,000 |
| Head office expenses | 1,220,000 |
| Supervisory staff: direct | 485,000 |
| Supervisory staff: indirect | 480,000 |
| Value of work certified to 30 September 2018 | 16,200,000 |
| Cost of work not yet certified | 2,150,000 |
| Progress payments | 12,150,000 |
| Material on site 30 September 2018 | 580,000 |
| Workers’ wages due but unpaid | 125,000 |
| Depreciation on plant is to be provided at the rate of 15% per annum on cost. |
You are required to prepare:
a) The contract account as at 30 September 2018 assuming the contract commenced 3 January 2018.
b) Contractee account.
c) An extract from the construction company’s financial position at 30 September 2018. (Total 20 Marks)
Answer
a) Contract Account for the year ended 30 September 2018
| Description | Amount (N) | Description | Amount (N) |
|---|---|---|---|
| Materials issued to site | 3,220,000 | Materials returned from site | 250,000 |
| Wages paid | 1,250,000 | Materials at site c/d | 580,000 |
| Wages accrued | 125,000 | Plant on site c/d | 1,952,500 |
| Plant at cost | 2,200,000 | Cost of work certified | 5,097,500 |
| Hiring of plants | 1,050,000 | Cost of work not yet certified | 2,150,000 |
| Supervisory staff: direct | 485,000 | ||
| Supervisory staff: indirect | 480,000 | ||
| Head office expenses | 1,220,000 | ||
| Total | 10,030,000 | Total | 10,030,000 |
| Cost to date | 5,097,500 | Value of work certified | 16,200,000 |
| Profit taken (wki) | 5,551,250 | ||
| Profit suspense c/d | 5,551,250 |
b) Contractee Account
| Description | Amount (N) | Description | Amount (N) |
|---|---|---|---|
| Value of work certified | 16,200,000 | Payment on account | 12,150,000 |
| Balance c/d | 4,050,000 | ||
| Total | 16,200,000 | Total | 16,200,000 |
c) SEGELU CONSTRUCTION LIMITED
Statement of Financial Position Extract
| Description | Amount (N) |
|---|---|
| Non-current Assets: | |
| Plant at cost | 2,200,000 |
| Less depreciation | 247,500 |
| Total Non-current Assets | 1,952,500 |
| Current Assets: | |
| Material on site | 580,000 |
| Work-in-progress | 648,750 |
| Total Current Assets | 1,228,750 |
| Current Liability: | |
| Accrued wages | 125,000 |
| Total Liabilities | 125,000 |
| Net Assets | 3,056,250 |
- Tags: Construction, Contract Account, Financial Position, Segelu Nigeria Limited
- Level: Level 1
- Topic: Costing Methods
- Series: MAY 2021
- Uploader: Kwame Aikins