Question 10.

Contract account Material control Creditors control (machinery) Bank (rent paid on equipment) Bank (wages paid) Bank (architect's fee paid) Overheads control Head office cost Profit & Loss (profit on contract) R100,000 Material control R25,000 Machinery transferred out R12,000 Client account (work certified) R31,000 Client account (extra work certified) R14,000 R16,500 R9,700 R58,800 R267,000 R267,000 R10,000 R19,000 R215,000 R23,000

Q10.1

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Question 10.2 (a) Plant Material control Wages control Direct expenses Hire of tower crane and scaffolding Surveyor's fee Overheads control Head office cost Wages control (Wages accrued) Contract account R100,000 Balance c/d: Plant on site R460,000 Balance c/d: Materials on site R350,000 Balance c/d: Uncertified work R45,000 Balance c/d: Cost of goods sold R60,000 R8,000 R60,000 R70,000 R30,000 R1,183,000 Balance b/d: Cost of goods sold Profit & Loss (profit on contract) R1,033,000 Education Authority R167,000 R1,200,000 Balance b/d: Plant on site Balance b/d: Materials on site Balance b/d: Uncertified work R75,000 Wages control (Wages accrued) R40,000 R35,000 R1,200,000 R30,000 R1,183,000 R1,200,000 R75,000 R40,000 R35,000 R1,033,000

Q10.2

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(b) Balance sheet as at 28 February 20X2 Assets Non-current assets Plant and equipment Current assets Inventory: Material on site Inventory: long-term contract WIP Receivables: retention debtor R40,000 R35,000 R120,000 R75,000 R195,000 R75,000

Liabilities Current liabilities Wages accrued R30,000 R30,000

Q10.2

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Question 10.3 (a) Material control Wages control Wages accrued c/d Bank (direct expenses) Direct expenses accrued c/d Plant Overheads control Head office charges Contract 179 R2,560,000 Material control (returned) R1,320,000 Insurance company R30,000 Balance c/d: Direct material R240,000 Balance c/d: Plant R10,000 Balance c/d: Uncertified work R2,000,000 Cost of goods sold c/d R370,000 R180,000 R6,710,000 Cost of goods sold b/d Profit & loss (profit on contract) R4,100,000 Debtor R900,000 R5,000,000 Balance b/d: Direct material Balance b/d: Plant Balance b/d: Uncertified work R355,000 Wages accrued b/d R1,500,000 Direct expenses accrued b/d R700,000 R5,000,000 R30,000 R10,000 R6,710,000 R5,000,000 R25,000 R30,000 R355,000 R1,500,000 R700,000 R4,100,000

Q10.3

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Debtor - Chemical Company Contract 179 R5,000,000 Bank Balance c/d R5,000,000 Balance b/d R500,000 R4,500,000 R500,000 R5,000,000

(b)

Balance sheet at 29 February 20X4 Assets Non-current assets Plant and equipment Current assets Inventory: Material on site Inventory: long-term contract WIP Receivables R355,000 R700,000 R500,000 R1,500,000 R1,555,000 R1,500,000

Liabilities Current liabilities Wages accrued Direct expenses accrued R30,000 R10,000 R40,000

Q10.3

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Question 10.4 Contract account: Katima Shops CC Machinery Telephone Speedy Electricians Wholesalers CC Material control Overheads absorbed Rent paid on equipment Wages control Bank (tools purchased) R400,000 Material control R4,700 Contract C501 R64,800 Bank (tools sold) R237,320 Balance c/d: Material R54,100 Balance c/d: Machinery R68,900 Balance c/d: Prepaid wages R9,500 Balance c/d: Uncertified work R74,000 Balance c/d: Cost of sales R16,000 R929,320 Balance b/d: Cost of sales Profit & loss (profit on contract) R529,980 Katima Shops CC R100,020 R630,000 Balance b/d: Material Balance b/d: Machinery Balance b/d: Prepaid wages Balance b/d: Uncertified work R7,000 R370,000 R1,000 R10,520 R630,000 R929,320 R630,000 R3,230 R5,590 R2,000 R7,000 R370,000 R1,000 R10,520 R529,980

Q10.4

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Calculation of value of machinery 29/02/X4: Cost price Terminal value R400,000 R100,000 R300,000 Economic life (5 years) Annual depreciation Depreciation for year ending 20X4 5 R60,000 R30,000

Katima Shops CC Contract account: Katima Shops CC R630,000 Bank Balance c/d R630,000 Balance b/d R70,000 R560,000 R70,000 R630,000

The profit on the sale of the tools is a normal business transaction between Otjikoto Builders and a third person and does not affect the contract between Otjikoto and Katima Shops. The profit of R300 will appear in the Profit and Loss account of Otjikoto as profit on sale of tools.

Q10.4

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Balance sheet at 29 February 20X4 Assets Non-current assets Plant and equipment Current assets Inventory: Material on site Inventory: long-term contract WIP Prepaid wages Receivables - contract debtor R7,000 R10,520 R1,000 R70,000 R370,000 R88,520 R370,000

Q10.4

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Question 10.5 Contract account (a) Material control Machinery Rent paid on equipment Wages control Sub-contractors Architect's fees Head office cost Overheads control R130,000 Material control R270,000 Contract DP-29 R12,300 Balance c/d: Machinery R61,000 Balance c/d: Material R19,700 Balance c/d: Uncertified work R6,100 Balance c/d: Cost of goods sold R3,660 R10,070 R512,830 Balance b/d: Cost of goods sold R209,930 Debtor Profit & loss (loss on contract) R209,930 Balance b/d: Machinery Balance b/d: Material Balance b/d: Uncertified work R252,000 R23,200 R21,600 R512,830 R160,000 R49,930 R209,930 R4,400 R1,700 R252,000 R23,200 R21,600 R209,930

Q10.5

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Debtor Contract account R160,000 Bank Balance c/d R160,000 Balance b/d R16,000 R144,000 R16,000 R160,000

Calculation of value of machinery 29/02/X4: Cost price Terminal value R270,000 R0 R270,000 Depreciation rate Annual depreciation Depreciation for year ending 20X4 (b) Balance sheet at 29 February 20X4 Assets Non-current assets Plant and equipment Current assets Inventory: Material on site Inventory: long-term contract WIP Receivables: retention debtors R23,200 R21,600 R16,000 R252,000 R60,800 R252,000 20% R54,000 R18,000

Q10.5

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Question 10.6

(a)

Notional profit: Sales value of certified work Cost of certified work Notional profit R120,000 R84,000 R36,000

Profit taken = 2/3 of notional profit x

Cash received from progress payments Value of certified work

2/3 of notional profit x Cash received from progress payments Value of certified work Profit taken

R24,000 R100,000 R120,000 R20,000

(b)

Contract price Estimated total cost Cost incurred to date Estimated cost to complete contract Estimated profit on completion

R200,000 R152,000 R115,000 R37,000 R48,000

Profit taken = (Progress payments received Contract price) x Estimated profit

Progress payments received Contract price x Estimated profit = Profit taken

R100,000 R200,000 R48,000 R24,000

Q10.6

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Question 10.8

(a)

Work certified method:

Value of work certified - Cost of certified work Notional profit

R75,000 R50,000 R25,000

Profit taken = 2/3 of notional profit x

Cash received from progress payments Value of certified work

2/3 of notional profit x Cash received from progress payments Value of certified work Profit taken

R16,667 R67,500 R75,000 R15,000

(b)

Percentage of completion method: Contract price Estimated total cost Cost incurred to date Estimated cost to complete contract Estimated profit on completion R100,000 R72,000 R60,000 R12,000 R28,000

Profit taken = (Progress payments received Contract price) x Estimated profit

Progress payments received Contract price x Estimated profit = Profit taken

R67,500 R100,000 R28,000 R18,900

Q10.8

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Question 10.9

Contract A-K Contract price Estimated total cost Cost incurred to date Estimated cost to complete contract Estimated profit on completion Degree of completion R150,000 R103,000 R68,000 R35,000 R47,000 66.02%

Contract L-Z R185,000 R161,000 R154,000 R7,000 R24,000 95.65%

Contract A--K: Contract is between 30% and 80% completed, therefore of the profit may be taken. Value of work certified - Cost of certified work Notional profit R110,000 R70,000 R40,000

Profit taken = 2/3 of notional profit x

Cash received from progress payments Value of certified work

2/3 of notional profit x Cash received from progress payments Value of certified work Profit taken

R26,667 R100,000 R110,000 R24,242

Contract L--Z: All of the profit may be taken: Estimated profit x Progress payments to date Contract price Profit taken R24,000 R160,000 R185,000 R20,757

Q10.9

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Question 10.10 Contract account Material control Machinery Wages control Direct expenses Overheads allocated R50,000 Balance c/d: Material R80,000 Balance c/d: Machinery R60,000 Balance c/d: Uncertified work R3,000 Balance c/d: Cost of goods sold R5,200 R198,200 Balance b/d: Cost of goods sold Profit & loss R110,000 Debtor R10,000 R120,000 Balance b/d: Material Balance b/d: Machinery Balance b/d: Uncertified work R10,000 R65,000 R13,200 R120,000 R198,200 R120,000 R10,000 R65,000 R13,200 R110,000

Q10.10

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