Deluxe Limited undertook a contract for Rs 5,00,000 on 1st July 1997. On 30th June 1998 when the accounts were closed, the following details about the contract were gathered:
|
Rs |
Rs |
||
|
Materials purchased |
1,00,000 |
Wages accrued 30 06 1998 |
5,000 |
|
Wages paid |
45,000 |
Work certified |
2,00000 |
|
General expenses |
10,000 |
Cash received |
1,50,000 |
|
Plant purchased |
50,000 |
Work uncertified |
15,000 |
|
Materials on hand 30 06 1998 |
25,000 |
Depreciation of plant |
5,000 |
The above contract contained an escalation clause, which read as follows:
“In the event of prices of materials and rates of wages increase by more than 5% the contract price would be increased accordingly by 25% of the raise in the cost of materials and wages beyond 5% in each case”.
It was found that since the date of signing the agreement the prices of materials and wages rates increased by 25%. The value of the work does not take into account the effect of the above clause.
Prepare the contract account working should form part of the answer.