In 2018, 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 2020. Information related to
the contract is as follows:
|
2018 |
2019 |
2020 |
|||||||
|
Cost incurred during the year |
$ |
2,580,000 |
$ |
4,042,000 |
$ |
2,175,800 |
|||
|
Estimated costs to complete as of year-end |
6,020,000 |
1,978,000 |
0 |
||||||
|
Billings during the year |
2,060,000 |
4,562,000 |
3,378,000 |
||||||
|
Cash collections during the year |
1,830,000 |
4,200,000 |
3,970,000 |
||||||
Westgate recognizes revenue over time according to percentage of
completion.
Required:
5. 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.
|
2018 |
2019 |
2020 |
||||||||||
|
Cost incurred during the year |
$ |
2,580,000 |
$ |
3,830,000 |
$ |
3,990,000 |
||||||
|
Estimated costs to complete as of year-end |
6,020,000 |
4,160,000 |
0 |
|||||||||
Req 5
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.)
|
Please calculate Gross profit (loss) in 2019 and 2020.
Solution:
| Computation of % of completion, revenue recognition and Gross Profit - Westgate Construction Company | |||||||||
| Year | Actual cost incurred (A) | Total cost incurred till date (B) | Total estimated Cost ( C ) | % of completion (D) (B/C) | Contract Price (E) |
Total Revenue to be recoganized (F) (E * D) | Revenue for current period (G) | Gross Profit | |
| 2018 | $2,580,000.00 | $2,580,000.00 | $8,600,000.00 | 30% | $10,000,000.00 | $3,000,000.00 | $3,000,000 | $420,000.00 | $3,000,000 - $2,580,000 |
| 2019 | $3,830,000.00 | $6,410,000.00 | $10,570,000.00 | 61% | $10,000,000.00 | $6,064,333.02 | $3,064,333 | -$990,000.00 | $10,000,000 - $10,570,000 - $420,000 |
| 2020 | $3,990,000.00 | $10,400,000.00 | $10,400,000.00 | 100% | $10,000,000.00 | $10,000,000.00 | $3,935,667 | $170,000.00 | $10,570,000 - $10,400,000 |
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