Question
In: Accounting
In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa...
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.
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.)
| 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 | ||||||
Solutions
Expert Solution
| 5) | |||
| Particulars | 2018 | 2019 | 2020 |
| Costs incurred during the year | $2,580,000 | $3,830,000 | $3,990,000 |
| Cumulative Cost incurred upto date (A) | $2,580,000 | $6,410,000 | $8,990,000 |
| Estimated cost to be incurred (B) | $6,020,000 | $4,160,000 | $0 |
| Total Costs have to be incurred ( C) = (A+B) | $8,600,000 | $10,570,000 | $8,990,000 |
| Completion Percentage (E ) = (A / C) | 30.00% | 60.64% | 100.00% |
| Total Project Revenue (F) | $10,000,000 | $10,000,000 | $10,000,000 |
| Revenue to be recognized in upto date (G) = (E * F) | $3,000,000 | $6,064,333 | $10,000,000 |
| Revenue recognized in previous years (H) | $0 | $3,000,000 | $6,064,333 |
| Revenue to be recognized in current year (I) = (G - H) | $3,000,000 | $3,064,333 | $3,935,667 |
| Expected Profit (J) = (F - C) | $1,400,000 | ($570,000) | $1,010,000 |
| Gross Profit To be recognized upto date (K) = (E*J) | $420,000 | ($345,667) | $1,010,000 |
| Gross Profit recognized in previous year (L) | $0 | $420,000 | ($345,667) |
| Gross Profit (Loss) to be recognized in current year (M) = (K - L) | $420,000 | ($765,667) | $664,333 |
| FINAL Answer | |||
| Particulars | 2018 | 2019 | 2020 |
| Revenue (I) | $3,000,000 | $3,064,333 | $3,935,667 |
| Gross Profit (Loss) (M) | $420,000 | ($765,667) | $664,333 |
ekkarill92 answered 1 year agoRelated Solutions
In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa...
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
$
2,604,000
$
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...
In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa...
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 $ 2,400,000 $ 3,600,000 $ 2,200,000 Estimated costs to
complete as of year-end 5,600,000 2,000,000 0 Billings during the
year 2,000,000 4,000,000 4,000,000 Cash collections during the year
1,800,000 3,600,000 4,600,000 Westgate Construction uses the
completed contract method...
In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa...
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
$
2,400,000
$
3,600,000
$
2,200,000
Estimated costs
to complete as of year-end
5,600,000
2,000,000
0
Billings during
the year
2,000,000
4,000,000
4,000,000
Cash collections
during the year
1,800,000
3,600,000
4,600,000
Westgate Construction uses the completed contract method...
In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa...
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
$
2,604,000
$
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...
In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa...
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
$2,624,000 $3,690,000 $2,074,600
Estimated costs to complete as of year-end
5,576,000 1,886,000 0
Billings during the year
2,200,000 4,114,000 3,686,000
Cash collections during the year
2,000,000 3,800,000 4,200,000
Westgate Construction uses the completed contract method of
accounting for long-term construction contracts.
Required:
1. Calculate the...
In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa...
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
$
2,610,000
$
3,162,000
$
2,230,800
Estimated costs to complete as
of year-end
6,390,000
2,028,000
0
Billings during the year
2,100,000
3,672,000
4,228,000
Cash collections during the
year
1,850,000
3,000,000
5,150,000
Westgate recognizes revenue over time according to...
In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa...
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
$
2,610,000
$
3,162,000
$
2,230,800
Estimated costs to complete as
of year-end
6,390,000
2,028,000
0
Billings during the year
2,100,000
3,672,000
4,228,000
Cash collections during the
year
1,850,000
3,000,000
5,150,000
Westgate recognizes revenue over time according to...
In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa...
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
$
2,640,000
$
2,300,000
$
2,926,000
Estimated costs to complete as
of year-end
6,160,000
2,660,000
0
Billings during the year
2,080,000
2,860,000
5,060,000
Cash collections during the
year
1,840,000
2,800,000
5,360,000
Westgate recognizes revenue over time according to...
In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa...
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
$
2,100,000
$
3,150,000
$
2,475,000
Estimated costs
to complete as of year-end
5,400,000
2,250,000
0
Billings during
the year
2,150,000
3,100,000
4,750,000
Cash collections
during the year
1,875,000
3,100,000
5,025,000
Westgate recognizes revenue over time according to...
In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa...
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
$
2,059,000
$
2,627,000
$
2,655,400
Estimated costs to complete as
of year-end
5,041,000
2,414,000
0
Billings during the year
2,190,000
2,496,000
5,314,000
Cash collections during the
year
1,895,000
2,400,000
5,705,000
Westgate recognizes revenue over time according to...
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