Question

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 $ 2,204,000 $ 3,192,000 $ 2,424,400

Estimated costs to complete as of year-end 5,396,000 2,204,000 0

Billings during the year 2,140,000 3,256,000 4,604,000

Cash collections during the year 1,870,000 3,200,000 4,930,000

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 intermediate calculations and round your final answers to the nearest whole dollar amount.

Loss amounts should be indicated with a minus sign.) 2018 2019 2020

Cost incurred during the year $ 2,204,000 $ 3,870,000 $ 4,110,000

Estimated costs to complete as of year-end 5,396,000 4,240,000 0

Answer 1

Solution 5:

Computation of % of completion, revenue recognition and Gross Profit - Westgate Construction Company
Year	Actual cost incurred (A)	Total cost incurred till date (B)	Total estimated Cost ( C )	% of completion (D) (B/C)	Contract Price (E)	Total Revenue to be recoganized (F) (E * D)	Revenue for current period (G)	Gross Profit (H)
2018	$2,204,000	$2,204,000	$7,600,000	29.00%	$10,000,000	$2,900,000	$2,900,000	$696,000	$2,900,000 - $2,204,000
2019	$3,870,000	$6,074,000	$10,314,000	58.89%	$10,000,000	$5,889,083	$2,989,083	-$1,010,000	$10,000,000-$10,314,000 - $696,000
2020	$4,110,000	$10,184,000	$10,184,000	100.00%	$10,000,000	$10,000,000	$4,110,917	$130,000	$10,000,000-$10,184,000 - $696,000 + $1,010,000