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.
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.)
2021 | 2022 | 2023 | |||||||
Costs incurred during the year | $ | 2,490,000 | $ | 3,815,000 | $ | 3,215,000 | |||
Estimated costs to complete as of year-end | 5,810,000 | 3,115,000 | 0 | ||||||
I am solving both parts for you.
Year | Revenue Recognized | Gross Profit Recognised |
2021 | 3000000 | 510000 |
2022 | 4800000 | 816000 |
2023 | 2200000 | 191400 |
Working Note:
% of Completion | |||
Actual Costs to date / Total Estimated costs = % of completion | |||
Actual Costs to date | Estimated total costs | ||
2021 | 2490000 | 8300000 | 30% |
2022 | 6474000 | 8300000 | 78% |
2023 | 8482600 | 8482600 | 100% |
2021 | |||
To date | Recognised in previous year | Recognised in 2021 | |
Construction Revenue | 3000000 | 0 | 3000000 |
Construction Expense | 2490000 | 0 | 2490000 |
Gross Profit (loss) | 510000 | 0 | 510000 |
2022 | |||
To date | Recognised in previous year | Recognised in 2022 | |
Construction Revenue | 7800000 | 3000000 | 4800000 |
Construction Expense | 6474000 | 2490000 | 3984000 |
Gross Profit (loss) | 1326000 | 510000 | 816000 |
2023 | |||
To date | Recognised in previous year | Recognised in 2023 | |
Construction Revenue | 10000000 | 7800000 | 2200000 |
Construction Expense | 8482600 | 6474000 | 2008600 |
Gross Profit (loss) | 1517400 | 1326000 | 191400 |
4)
Year | Revenue Recognized | Gross Profit Recognised |
2021 | 3000000 | 510000 |
2022 | 3693206 | -121794 |
2023 | 3306794 | 91794 |
Working:
% of Completion | |||
Actual Costs to date / Total Estimated costs = % of completion | |||
Actual Costs to date | Estimated total costs | ||
2021 | 2490000 | 8300000 | 30% |
2022 | 6305000 | 9420000 | 67% |
2023 | 9520000 | 9520000 | 100% |
2021 | |||
To date | Recognised in previous year | Recognised in 2021 | |
Construction Revenue | 3000000 | 0 | 3000000 |
Construction Expense | 2490000 | 0 | 2490000 |
Gross Profit (loss) | 510000 | 0 | 510000 |
2022 | |||
To date | Recognised in previous year | Recognised in 2022 | |
Construction Revenue | 6693206 | 3000000 | 3693206 |
Construction Expense | 6305000 | 2490000 | 3815000 |
Gross Profit (loss) | 388206 | 510000 | -121794 |
2023 | |||
To date | Recognised in previous year | Recognised in 2023 | |
Construction Revenue | 10000000 | 6693206 | 3306794 |
Construction Expense | 9520000 | 6305000 | 3215000 |
Gross Profit (loss) | 480000 | 388206 | 91794 |