Question

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.

2018			2019			2020
Cost incurred during the year	$	2,044,000		$	2,628,000		$	2,890,800
Estimated costs to complete as of year-end		5,256,000			2,628,000			0
Billings during the year		2,170,000			2,502,000			5,328,000
Cash collections during the year		1,885,000			2,600,000			5,515,000

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	$	2,044,000		$	3,885,000		$	3,285,000
Estimated costs to complete as of year-end		5,256,000			3,185,000			0

Answer 1

Requirement- 5

	2021	2022	2023
Revenue	$2,800,000	$3,700,000	$3,500,000
Gross profit(loss)	$ 756,000	-$185,000	-$655,000

Working:

		2021 ($)	2022 ($)	2023 ($)
A	contract price	10,000,000	10,000,000	10,000,000
B	cost incurred to date	2,044,000	5,929,000 (2,044,000+3,885,000)	10,084,000 (5,929,000+4,155,000)
C	estimated cost yet to be incurred to complete the contract	5,256,000	3,185,000	---
D=(B+C)	Total cost	7,300,000	9,114,000	10,084,000
E=[B/D] *100%	% of completion	28%	65%	100%
F=A*E	revenue to date	2,800,0000	6,500,000	10,000,000
G	revenue of previous year	---	2,800,000	6,500,000
H=F-G	Net revenue this year	2,800,000	3,700,000	3,500,000
I(=B)	cost to date	2,044_000	5,929,000	10,084,000
J	cost to date of previous year	---	2,044_000	5,929,000
K=I-J	Net cost for the year	2,044 000	3,885,000	4,155,000
L=A-D	estimated gross profit(loss)	2,700,000	886,000	(84,000)
M=H-K	Gross profit(loss) to be recognised	7,56,000	(185,000)	(655,000)