The following information relates to Contract 2501, which was undertaken for the construction of roadways for the Portmore Municipality.
The total value of the contract was $1,500,000 and it is at a stage where profits can be attributed to it. Details of the contract are shown in the books:
$
Materials sent to site 1,085,349
Labour engaged on site 174,000
Plant installed at cost 150,000
Direct expenditure 40,000
General overhead charges 3,160
Materials returned to store 5,490
Work certified 1,400,000
Cost of work not certified 60,500
Materials on hand, December 31 1,883
Wages accrued on December 31 2,400
Direct expenditure accrued on Dec 31 24,000
Value of plant December 31 20,000
Cash received on account amount 1,200,000
Required:
a). Prepare the Contract Account as at December 31, 2020.
b). Prepare the Contract P&L account for the year ended December 31, 2020.
c). Prepare the Contractee Account as at December 31, 2020.
d). Explain the term 'retention money.'