Problem 5-10 Long-term contract; revenue recognition over time [LO5-8, 5-9] [The following information applies to the...

Problem 5-10 Long-term contract; revenue recognition over time [LO5-8, 5-9]

[The following information applies to the questions displayed below.]

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.

rev: 09_15_2017_QC_CS-99734

Problem 5-10 Part 5

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

Expert Solution

Year	2018	2019	2020
Cost incurred during the year	2580000	4042000	2175800
Cumulative cost incurred at end of year	2580000	6622000	8797800

Cumulative cost incurred at end of year	2580000	6622000	8797800
Add: Estimated costs to complete as of year-end	6020000	1978000	0
Total estimated cost	8600000	8600000	8797800

Percentage of completion (cumulative cost incurred at end of year / Total estimated cost)	30.00%	77.00%	100.00%

Revenue recognized till the date (10000000 * percentage of completion)	3000000	7700000	10000000
Less: revenue recognized up to earlier year	0	3000000	7700000
Revenue recognized in current year	3000000	4700000	2300000

Revenue recognized in current year	3000000	4700000	2300000
Less: cost incurred during the year	2580000	4042000	2175800
Gross profit	420000	658000	124200

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ekkarill92 answered 1 year ago

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