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:

	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

Answer 1

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