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[The following information applies to the questions displayed below.] In 2021, the Westgate Construction Company entered...

[The following information applies to the questions displayed below.]

In 2021, 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 2023. Information related to the contract is as follows:

2021 2022 2023 Cost incurred during the year $ 2,580,000 $ 4,042,000 $ 2,175,800 Estimated costs to complete as of year-end 6,020,000 1,978,000 0 Billings during the year 2,060,000 4,562,000 3,378,000 Cash collections during the year 1,830,000 4,200,000 3,970,000

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.) 2021 2022 2023 Costs incurred during the year $ 2,580,000 $ 3,830,000 $ 3,230,000 Estimated costs to complete as of year-end 6,020,000 3,130,000 0

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Answer #1
Particulars 2021 2022 2023
a Cost incurred $2,580,000 $4,042,000 $2,175,800
b Cost incurred cumulative $2,580,000 $6,622,000 $8,797,800
c Estimated completion cost $6,020,000 $1,978,000 $0
d % of completion 30.00% 77.00% 100%
2,580,000/(6,020,000+2,580,000) 6,622,000/(1,978,000+6,622,000)
Contract Price = $10,000,000
Revenue to be recognised(cumulative) (10,00,000*d) $3,000,000 $7,700,000 $10,000,000
e Revenue to recognised per year $3,000,000 $4,700,000 $2,300,000
Gross profit( e - a ) $420,000 $658,000 $124,200
Cost incurred $2,580,000 $3,830,000 $3,230,000
Cost incurred cumulative $2,580,000 $6,410,000 $9,640,000
Estimated completion cost $6,020,000 $3,130,000 $0
% of completion 30.00% 67.19% 100%
Revenue to be recognised(cumulative) (10,00,000*%) $3,000,000 $6,719,078 $10,000,000
Revenue per year $3,000,000 $3,719,078 $3,280,922
Gross profit $420,000 -$110,922 $50,922
(3000000-2580000) (3719078-3830000) (3280922-3230000)
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