Question

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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	$	2,542,000		$	3,772,000		$	2,074,600
Estimated costs to complete as of year-end		5,658,000			1,886,000			0
Billings during the year		2,020,000			4,294,000			3,686,000
Cash collections during the year		1,810,000			3,800,000			4,390,000

Westgate recognizes revenue over time according to percentage of completion.

rev: 09_15_2017_QC_CS-99734

Required:

1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. (Do not round intermediate calculations. Loss amounts should be indicated with a minus sign.)

Answer 1

Soluton 1:

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 (H) (G - A)
2018	$2,542,000.00	$2,542,000.00	$8,200,000.00	31%	$10,000,000.00	$3,100,000.00	$3,100,000.00	$558,000.00
2019	$3,772,000.00	$6,314,000.00	$8,200,000.00	77%	$10,000,000.00	$7,700,000.00	$4,600,000.00	$828,000.00
2020	$2,074,600.00	$8,388,600.00	$8,388,600.00	100%	$10,000,000.00	$10,000,000.00	$2,300,000.00	$225,400.00