AB Contractors undertakes a fixed price contract of 350 Lakhs. Information related to contract is given as under: Material purchased 125 lakhs…

CA Intermediate · Advanced Accounting · PYQS · January 2025
AB Contractors undertakes a fixed price contract of 350 Lakhs. Information related to contract is given as under: Material purchased 125 lakhs Labour charges 95 lakhs Unused material 22 lakhs Estimated future costs to be incurred to complete the contract 115 Lakhs. Payment received as part payment of contract 50 Lakhs. Machinery used for 4 years for the contract. Original cost of the machine is 210 Lakhs. Expected life of machinery is 20 years. What will be the Profit/Loss on the contract?
(A) Loss on contract 5 lakhs
(B) Loss on contract 49 Lakhs
(C) Profit on contract 45 Lakhs
(D) Profit on contract - 26.5 Lakhs

Suggested Answer and Working Notes:

Correct Answer: Option (A)

Loss on contract 5 lakhs

Topics: Accounting for Reconstruction of Companies

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