Question

Required information Problem 6-10 (Algo) Long-term contract; revenue recognition over time (LO6-8, 6-9] 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 2023 $2,300,000 $2,926,000 2,660,000 2,860,000 5,060,000 2,800,0005 , 360,000 Westgate recognizes revenue over time according to percentage of completion. Problem 6-10 (Algo) Part 4 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 $ 2,640,000 6,160,000 Costs incurred during the year Estimated costs to complete as of year-end 2022 $3,840,000 3,140,000 2023 $3,240,000 Answer is complete but not entirely correct. Revenue Gross profit (loss) $ $ 2021 3,000,000 360,000 $ $ 2022 3,700,000 $ (140,000) Ⓡ$ 2023 3,300,000 X 60,000

Answer 1

4.

	2021	2022	2023
Revenue	$       3,000,000	$       3,735,967	$       3,264,033
Gross profit (loss)	$         3,60,000	$       -1,04,033	$             24,033

Working:

2022
Total costs incurred to date (2640000 + 3840000)	6480000
Estimated costs to complete	3140000
Total estimated costs	9620000
Percentage of completion (6480000/9620000)	67.35967%
Revenue to be recognized	6735966.74
Less: Revenue recognized in 2021	3000000
Revenue recognized in 2022	3735966.74
Less: Costs incurred in 2022	3840000
Gross profit (loss)	-104033
2023
Total costs incurred to date (6480000 + 3240000)	9720000
Estimated costs to complete	0
Total estimated costs	9720000
Percentage of completion (9720000/9720000)	100.0%
Revenue to be recognized	10000000
Less: Revenue recognized to date	6735967
Revenue recognized in 2023	3264033
Less: Costs incurred in 2023	3240000
Gross profit (loss)	24033