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: 2021 2022 2023 Cost incurred during the year $ 2,016,000 $ 2,808,000 $ 2,613,600 Estimated costs to complete as of year-end 5,184,000 2,376,000 0 Billings during the year 2,180,000 2,644,000 5,176,000 Cash collections during the year 1,890,000 2,500,000 5,610,000 Westgate recognizes revenue over time according to percentage of completion.

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: 2023 $2,613,600 Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year 2021 $2,016,000 5,184,000 2,180,000 1,890,000 2022 $ 2,808,000 2,376,000 2,644,000 2,500,000 5,176,000 5,610,000 Westgate recognizes revenue over time according to percentage of completion. 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: 0 0 Current liabilities:

Answer 1

Solution:

Balance sheet	2021		2022
Current assets:
Accounts receivable		$290,000		$434,000
Construction in progress	$2,800,000		$6,700,000
Less: Billings	($2,180,000)		($4,824,000) ($21,80,000+$2,644,000)
Costs and profit in excess of billings	$620,000		$1,876,000
Current liabilities:
Billings in excess of costs	$164,000		$0

Working:

Account receivable:

2021 = $2,180,000 -$1,890,000

=$290,000

2022 = $290,000+($2,644,000 -$2,500,000)

=$434,000

Calculation of percent of completion:

	2021	2022
Cumulative costs to date	$2,016,000	$4,824,000 ($2,106,000+$2,808,000)
Add: Estimate costs to complete as of year end	$5,184,000	$2,376,000
Estimated total cost	$7,200,000	$7,200,000
Percent of completion	28% ($2,106,000/$7,200,000)	67% ($4,824,000/$7,200,000)

calculation of constructed value :

2021 =$10,000,000*28%

=$2,800,000

2022 =$10,000,000*67%

=$6,700,000

Calculation of billing in excess costs :

2021 =$2,180,000 -$2,016,000

=$164,000

2022 =$164,000 +($2,644,000 -$2,808,000)

=$0

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