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 $ 2,604,000 $ 4,032,000 $ 1,940,400 Estimated costs to complete as of year-end 5,796,000 1,764,000 0 Billings during the year 2,040,000 4,596,000 3,364,000 Cash collections during the year 1,820,000 4,000,000 4,180,000 Westgate recognizes revenue over time according to percentage of completion.
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.) 2021 2022 2023 Costs incurred during the year $ 2,604,000 $ 3,820,000 $ 3,960,000 Estimated costs to complete as of year-end 5,796,000 4,140,000 0
Solution 5:
| 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) | |
| 2021 | $2,604,000 | $2,604,000 | $8,400,000 | 31.00% | $10,000,000 | $3,100,000 | $3,100,000 | $496,000 | $3,100,000 - $2,604,000 |
| 2022 | $3,820,000 | $6,424,000 | $10,564,000 | 60.81% | $10,000,000 | $6,081,030 | $2,981,030 | -$1,060,000 | $10,000,000-$10,564,000 - $496,000 |
| 2023 | $3,960,000 | $10,384,000 | $10,384,000 | 100.00% | $10,000,000 | $10,000,000 | $3,918,970 | $180,000 | $10,000,000-$10,384,000 - $496,000 + $1,060,000 |
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