Question

Required Information [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: Cost incurred during the year Estimated costs to complete as of year- end Billings during the year Cash collections during the year 2021 $2, 640,000 6,160,000 2,080,000 1, 840,000 2022 $2,300,000 2,660,000 2,860,000 2,800,000 2023 $2,926, 000 0 5,060,000 5,360,000 Westgate recognizes revenue over time according to percentage of completion 5. 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 Intermedlate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be Indicated with a minus sign.) 2021 $2, 640,000 6,160,000 Costs incurred during the year Estimated costs to complete as of year- end 2022 $3,840,000 4,180,000 2023 $4,020,000 S 2021 3,000,000 $ 2022 2023 3,078,799 S 3,921,201 Revenue Gross profit (loss)

Answer 1

Answer

• Requirement 5

	2021	2022	2023
Revenue	$                3,000,000.00	$               3,078,799.00	$                    3,921,201.00
Gross Profit (Loss)	$                   360,000.00	$             (1,020,000.00)	$                        160,000.00

• Workings

Working		2021	2022	2023
A	Contract Price	$             10,000,000.00	$             10,000,000.00	$                  10,000,000.00
B	Cost Incurred to Date	$                2,640,000.00	$               6,480,000.00	$                  10,500,000.00
C	Estimated cost yet to be incurred to complete the contract	$                6,160,000.00	$               4,180,000.00	$                                         -
D = B+C	Total Cost	$                8,800,000.00	$             10,660,000.00	$                  10,500,000.00
E = (B/D) x 100	% of Completion	30.00%	60.79%	100.00%
F = A x E	Revenue to date	$                3,000,000.00	$               6,078,799.25	$                  10,000,000.00
G	Revenue of Previous year	$                                     -	$               3,000,000.00	$                    6,078,799.25
H = F - G	Net Revenue this year	$                3,000,000.00	$               3,078,799.25	$                    3,921,200.75
I (=B)	Cost to date	$                2,640,000.00	$               6,480,000.00	$                  10,500,000.00
J	Cost to date of previous year	$                                     -	$               2,640,000.00	$                    6,480,000.00
K = I - J	Net Cost for the year	$                2,640,000.00	$               3,840,000.00	$                    4,020,000.00
L = A - D	Estimated Gross Profit (Loss)	$                1,200,000.00	$                 (660,000.00)	$                     (500,000.00)
M	Gross Profit (Loss) to be recognised	$                   360,000.00	$             (1,020,000.00)	$                        160,000.00