Question

# Required information [The following information applies to the questions displayed below.] In 2021, the Westgate Construction...

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 \$ 2,490,000 \$ 3,984,000 \$ 2,008,600 Estimated costs to complete as of year-end 5,810,000 1,826,000 0 Billings during the year 2,030,000 4,444,000 3,526,000 Cash collections during the year 1,815,000 3,900,000 4,285,000

Westgate recognizes revenue over time according to percentage of completion.

Percentage of Completion Method:

Revenue to be recognized = Costs incurred to date / Total estimated costs * Contract Price - Revenue that is recognized previously

2021:

Revenue to be recognized in 2021 = \$2,490,000/[\$5,810,000 + \$1,826,000] * \$10,000,000 - \$0

= \$2,490,000/\$7,636,000 * \$10,000,000 - \$0

= \$3,260,870

Therefore, revenue recognized in 2021 under percentage of completion method is \$3,260,870.

2022:

Revenue to be recognized in 2022 = (\$2,490,000 + \$3,984,000/\$7,636,000 * \$10,000,000 - \$3,260,870

= \$6,474,000 / \$7,636,000 * \$10,000,000 - \$3,260,870

= \$5,217,391

Therefore, revenue recognized in 2022 under percentage of completion method is \$5,217,391.

2023:

Revenue to be recognized in 2023 = \$10,000,000 - \$3,260,870 - \$5,217,391

= \$1,521,739

Therefore, revenue recognized in 2023 under percentage of completion method is \$1,521,739.

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