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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 = 20% 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- $ 3,800,000 (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 |
2021 | 2022 | 2023 | |||||||
Journal Entries | Debit $ | Credit $ | Debit $ | Credit $ | Debit $ | Credit $ | |||
Costs Incurred | CIP (Work-in-progress) | 2,490,000 | 3,984,000 | 2,008,600 | |||||
Cash | 2,490,000 | 3,984,000 | 2,008,600 | ||||||
Billing | Accounts Receivable | 2,030,000 | 4,444,000 | 3,526,000 | |||||
Billing on CIP | 2,030,000 | 4,444,000 | 3,526,000 | ||||||
Receiving Payments | Cash | 1,815,000 | 3,900,000 | 4,285,000 | |||||
Accounts Receivable | 1,815,000 | 3,900,000 | 4,285,000 | ||||||
Period end adjustments for Revenue | Construction Expense | 2,490,000 | 3,984,000 | 2,008,600 | |||||
(Gross Profit entry) | CIP (Work-in-progress) | 510,000 | 816,000 | 191,400 | |||||
Construction Revenue | 3,000,000 | 4,800,000 | 2,200,000 | ||||||
Completing the Project | Billing on CIP | 10,000,000 | |||||||
CIP (Work-in-progress) | 10,000,000 |
In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa...
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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 $2,291,000 5,609,000 2,110,000 1,855,000 2022 $3,555,000 2,054,000 3,736,000 3,500,000 2023 $2,259,400 0 4,154,000...
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