Question

In: Accounting

Required information [The following information applies to the questions displayed below.]    In 2018, the Westgate...

Required information

[The following information applies to the questions displayed below.]
  

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 $ 2,204,000 $ 3,192,000 $ 2,424,400
Estimated costs to complete as of year-end 5,396,000 2,204,000 0
Billings during the year 2,140,000 3,256,000 4,604,000
Cash collections during the year 1,870,000 3,200,000 4,930,000


Westgate recognizes revenue over time according to percentage of completion.


rev: 09_15_2017_QC_CS-99734

4. 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.)

2018 2019 2020
Cost incurred during the year $ 2,204,000 $ 3,870,000 $ 3,270,000
Estimated costs to complete as of year-end 5,396,000 3,170,000 0

Solutions

Expert Solution

Answers

  • All working forms part of the answer
  • Working based on Requirement 4 data

Working

2018

2019

2020

A

Contract Price

$     10,000,000.00

$    10,000,000.00

$        10,000,000.00

B

Cost Incurred to Date

$       2,204,000.00

$       6,074,000.00

$          9,344,000.00

C

Estimated cost yet to be incurred to complete the contract

$       5,396,000.00

$       3,170,000.00

$                                -  

D = B+C

Total Cost

$       7,600,000.00

$       9,244,000.00

$          9,344,000.00

E = (B/D) x 100

% of Completion

29.00%

65.71%

100.00%

F = A x E

Revenue to date

$       2,900,000.00

$       6,570,748.59

$        10,000,000.00

G

Revenue of Previous year

$                            -

$       2,900,000.00

$          6,570,748.59

H = F - G

Net Revenue this year

$       2,900,000.00

$       3,670,748.59

$          3,429,251.41

I (=B)

Cost to date

$       2,204,000.00

$       6,074,000.00

$          9,344,000.00

J

Cost to date of previous year

$                            -  

$       2,204,000.00

$          6,074,000.00

K = I - J

Net Cost for the year

$       2,204,000.00

$       3,870,000.00

$          3,270,000.00

L = H - K

Gross Profits

$           696,000.00

$        (199,251.41)

$              159,251.41

  • Requirement 4 answers

2018

2019

2020

Revenue

$       2,900,000

$       3,670,749

$          3,429,251

Gross Profits

$           696,000

$        (199,251)

$              159,251


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