Question

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	$	2,072,000		$	2,738,000		$	2,849,000
Estimated costs to complete as of year-end		5,328,000			2,590,000			0
Billings during the year		2,160,000			2,650,000			5,190,000
Cash collections during the year		1,880,000			2,700,000			5,420,000

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	$	2,072,000		$	3,880,000		$	3,280,000
Estimated costs to complete as of year-end		5,328,000			3,180,000			0

	2018 2019 2020 Revenue Gross profit (loss)

Answer 1

	Percentage completion method	2018	2019	2020
	Cost incurred in till previous year	0	2072000	4810000
ADD	Cost incurred during the year	2072000	2738000	2849000
	Total cost incurred till date	2072000	4810000	7659000
ADD	Estimated cost to be incurred	5328000	2590000	0
	Total estimated cost to be incurred	7400000	7400000	7659000
	Percentage of completion (A)	28%	65%	100%
	(cost incurred till date /total estimated cost )
	Total revenue (B)	10000000	10000000	10000000
	Total revenue recognized (A *B)	2800000	6500000	10000000
Less	Revenue recognized in previous year	0	2800000	6500000
	revenue recognized in current year	2800000	3700000	3500000
		2018	2019	2020
	Revenue	2800000	3700000	3500000
Less	Cost incurred	2072000	2738000	2849000
	Gross profit	728000	962000	651000

B	Percentage completion method	2018	2019	2020
	Cost incurred in till previous year	0	2072000	5952000
ADD	Cost incurred during the year	2072000	3880000	3280000
	Total cost incurred till date	2072000	5952000	9232000
ADD	Estimated cost to be incurred	5328000	318000	0
	Total estimated cost to be incurred	7400000	6270000	9232000
	Percentage of completion (A)	28%	94.92%	100%
	(cost incurred till date /total estimated cost )
	Total revenue (B)	10000000	10000000	10000000
	Total revenue recognized (A *B)	2800000	9492822.96	10000000
Less	Revenue recognized in previous year	0	2800000	9492822.96
	revenue recognized in current year	2800000	6692822.96	507177.04
		2018	2019	2020
	Revenue	2800000	6692822.96	507177.04
Less	Cost incurred	2072000	3880000	3280000
	Gross profit	728000	2812822.96	-2772822.96