In: Accounting
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 | $ | 2,490,000 | $ | 3,984,000 | $ | 2,008,600 | |||
Estimated costs to complete as of year-end | 5,810,000 | 1,826,000 | 0 | ||||||
Billings during the year | 2,030,000 | 4,444,000 | 3,526,000 | ||||||
Cash collections during the year | 1,815,000 | 3,900,000 | 4,285,000 | ||||||
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 | $ | 2,490,000 | $ | 3,815,000 | $ | 3,945,000 | |||
Estimated costs to complete as of year-end | 5,810,000 | 4,130,000 | 0 | ||||||
2021 | 2022 | 2023 | |||
Revenue | = | $ 30,00,000 | $ 30,42,166 | $ 39,57,834 | |
Gross Profit | = | $ 5,10,000 | $ -7,72,834 | $ 12,834 | |
Workings: | |||||
Construction Cost incurred till date | = | $ 24,90,000 | |||
Estimated additional cost to complete | = | $ 58,10,000 | |||
Total estimated cost | = | $ 83,00,000 | |||
(i) | Percentage of Completion ($2490000 / $8300000) | = | 30% | ||
(ii) | Total Project Value | = | $ 1,00,00,000 | ||
(i)*(ii) | Revenue to date | = | $ 30,00,000 | ||
Revenue recognized for the year 2021 | = | $ 30,00,000 | |||
Less: | Construction Cost incurred for the year | = | $ 24,90,000 | ||
Gross profit recognize | = | $ 5,10,000 | |||
Construction Cost incurred till date | = | $ 63,05,000 | |||
Estimated additional cost to complete | = | $ 41,30,000 | |||
Total estimated cost | = | $ 1,04,35,000 | |||
(i) | Percentage of Completion ($6305000 / $10435000) | = | 60% | ||
(ii) | Total Project Value | = | $ 1,00,00,000 | ||
(i)*(ii) | Revenue to date | = | $ 60,42,166 | ||
Revenue recognized for the year 2022 | = | $ 30,42,166 | |||
Less: | Construction Cost incurred for the year | = | $ 38,15,000 | ||
Gross profit recognize | = | $ -7,72,834 | |||
Revenue recognized for the year 2023 | = | $ 39,57,834 | |||
Less: | Construction Cost incurred for the year | = | $ 39,45,000 | ||
Gross profit recognize | = | $ 12,834 |