Question

Required information [The following information applies to the questions displayed below] In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2020. Information related to the contract is as follows: 2018 2019 2020 Cost incurred during the year $2,072,000 $2,738,000 2,590, 000 2,650, 000 $2,849,000 Estimated costs to complete as of year-end Billings during the year Cash collections during the year 5,328,000 2,160,000 1,880,000 0 5,190,000 5, 420,000 2,700,000 Westgate recognizes revenue over time according to percentage of completion. 4. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs incurred and costs to complete information. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.) 2018 2019 $3,880,000 3,180,000 2020 $2,072,000 $3,280,000 Cost incurred during the year Estimated costs to complete as of year-end 5,328,000 0 2018 2019 2020 Revenue $2,800,000 $ 728,000 Gross profit (loss)

Answer 1

2018 2072000 2072000 2019 3880000 5952000 2020 3280000 9232000 Solution 4. Particulars Cost Incurred during the year Cumulative Cost (incurred till date) - A Estimated Costs to complete the construction Total Estimated Costs -B % of completeion (A/B)*100 5328000 7400000 28.00% 3180000 9132000 65.18% 9232000 100.00% Contract Value = $ 1,00,00,000.00 Statement showing Revenue and Gross profits Particulars 2018 2019 2020 Percentage of Completion 28.00% 65.18% 100.00% Revenue to be recognised Contract Value x Percentage of completion $ 28,00,000 $ 65,17,740 $ 1,00,00,000 $6517740 - $10000000 - Revenue to be recognised during year $ 28,00,000 $2800000 $6517740 = $ 28,00,000 $ 37,17,740 $ 34,82,260 Less: Cost incurred during year $ 20,72,000 $ 38,80,000 $ 32,80,000 Gross Profit / -Loss $ 7,28,000 $ -1,62,260 $ 2,02,260

Solution of the problem in Table (Westgate Construction Co.) Particulars 2018 Cost Incurred during the year 2072000 Cumulative Cost (incurred till date) - A 2072000 Estimated Costs to complete the 5328000 Total Estimated Costs -B 7400000 % of completeion (A/B)*100 28.00% 2020 2849000 7659000 2019 2738000 4810000 2590000 7400000 65.00% 7659000 100.00% Contract Value = $ 1,00,00,000.00 Statement showing Revenue and Gross profits Particulars 2018 2019 2020 Percentage of Completion 28.00% 65.00% 100.00% Revenue to be recognised Contract $ 28,00,000 $ 65,00,000 $ 1,00,00,000 $6500000 - $10000000 - Revenue to be recognised during year $ 28,00,000 $2800000 $6500000 = $ 28,00,000 $ 37,00,000 $ 35,00,000 Less: Cost incurred during year $ 20,72,000 $ 27,38,000 $ 28,49,000 Gross Profit/ -Loss $ 7,28,000 $ 9,62,000 $ 6,51,000