Question

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: 2023 $2,008,600 Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year 2021 $2,490,000 5,810,000 2,030,000 1,815,000 2022 $3,984,000 1,826,000 4,444,000 3,900,000 3,526,000 4,285,000 Westgate recognizes revenue over time according to percentage of completion. Problem 6-10 (Algo) Part 3 3. Complete the information required below to prepare a partial balance sheet for 2021 and 2022 showing any items related to the contract. (Do not round intermediate calculations.) 2021 2022 Balance Sheet (Partial) Current assets: Current liabilities:

Answer 1

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Westgate Construction Company
Workings	Calculation of Gross Profit
Particulars	2021	2022	2023
Contract Price	10,000,000	10,000,000	10,000,000	A
Cost Incurred during the year	2,490,000	3,984,000	2,008,600	C
Cost Incurred to date	2,490,000	6,474,000	8,482,600
(Cost incurred to date of the present year less Cost incurred to date of the previous year)
Estimated cost to complete	5,810,000	1,826,000	-	D
Estimated total cost	8,300,000	8,300,000	8,482,600	E=C+B
(Cost Incurred to date+ Estimated cost to complete )
Percentage complete	30.00%	78.00%	100.00%	F=B/E
(Cost Incurred to date/Estimated total cost)
Revenue to be recognized	3,000,000	4,800,000	2,200,000	G
(Contract Price*Percentage complete)- revenue previously recognized
Year 2021: 30% completed. Revenue recognized = 30% x $ 10,000,000 = $ 3,000,000.
Year 2022: 78% completed. Revenue recognized = 78% x $ 10,000,000 – $ 3,000,000 (previously recognized) = $ 4,800,000.
Year 2023: 100% completed. Revenue recognized = 100% x $ 10,000,000 – $ 3,000,000- $ 4,780,000 (previously recognized) = $ 2,200,000.
Gross Profit/(Loss)	510,000	816,000	191,400	H=G-C
Billings during the year	2,030,000.00	4,444,000.00	3,526,000.00
Cash collections during the year	1,815,000.00	3,900,000.00	4,285,000.00
Ans to 3				Workings for Balance Sheet
				CIP (Work-in-progress)
Balance Sheet (Partial)	2021	2022		Account	Amount ($)
Current Assets:				Cash	2,490,000.00
CIP (Work-in-progress)	3,000,000.00	7,800,000.00		Gross Profit	510,000.00
	3,000,000	7,800,000		Balance at the end of 2021	3,000,000.00
Current Liabilities:				Cash	3,984,000.00
Billing on CIP	2,030,000.00	4,444,000.00		Gross Profit	816,000.00
	2,030,000.00	4,444,000.00		Balance at the end of 2022	7,800,000.00
				Billing on CIP
				Account	Amount ($)
				Accounts Receivable	2,030,000.00
				Balance at the end of 2021	2,030,000.00
				Accounts Receivable	4,444,000.00
				Balance at the end of 2022	6,474,000.00