The following data is provided for M/s. Raj Construction Co. Contract Price -85 lakhsMaterials issued -21 Lakhs out of which Materials costing 4…

CA Intermediate · Advanced Accounting · RTP · May 2024
The following data is provided for M/s. Raj Construction Co. Contract Price -85 lakhsMaterials issued -21 Lakhs out of which Materials costing 4 Lakhs is still lying unused at the end of the period.Labour Expenses for workers engaged at site -16 Lakhs (out of which 1 Lakh is still unpaid)Specific Contract Costs = 5 LakhsSub-Contract Costs for work executed -7 Lakhs, Advances paid to Sub-Contractors -4 LakhsFurther Cost estimated to be incurred to complete the contract -35 Lakhs You are required to compute the Percentage of Completion, the Contract Revenue and Cost to be recognized as per AS-7.

Suggested Answer and Working Notes:

Computation of contract cost Lakh Lakh Material cost incurred on the contract (net of closing stock) (21-4) 17 Add: Labour cost incurred on the contract (including outstanding amount) 16 Specified contract cost 5 Sub-contract cost (advances should not be considered) 7 Cost incurred (till date) 45 Add: further cost to be incurred 35 Total contract cost 80 Percentage of completion = Cost incurred till date/Estimated total cost = 45,00,000/80,00,000 = 56.25% Contract revenue and costs to be recognized Contract revenue (85,00,000x56.25%) = 47,81,250 Contract costs = 45,00,000

Topics: AS 7

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