MI – May 2023 – L1 – SB – Q3 – Costing Methods

This question asks for the preparation of contract accounts for two contracts and shows profit taken at year-end.

Question

Joyle Construction Limited is currently working on two contracts with the following details as at December 31.

Details	Contract A (₦’000)	Contract B (₦’000)
Material	16,140	23,100
Wages	61,900	23,136
Expenses on site	8,270	10,344
Plant purchased	191,000	78,000
Accrued wages	5,060	2,690
Materials as at 31/12	2,670	7,680
Value of work certified	140,000	102,000
Cash received on certified work	119,000	76,500
Completed work not yet certified	4,450	2,640
Head office charges apportioned	15,660	12,230
Plant value as at 31/12	152,800	62,400

The contract value is ₦500,000,000 for Contract A and ₦350,000,000 for Contract B.

Required:
Prepare contract “A” and contract “B” accounts for Joyle Construction Limited as at December 31 in a columnar form. Show the profit taken at year-end and the balances carried forward. (Show workings where necessary).

Answer