Required information Problem 6-10 (Algo) Long-term contract; revenue recognition over time [LO6-8, 6-9] [The following information...

Required information

Problem 6-10 (Algo) Long-term contract; revenue recognition over time [LO6-8, 6-9]

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

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	$	2,044,000	$	2,628,000	$	2,890,800
Estimated costs to complete as of year-end		5,256,000		2,628,000		0
Billings during the year		2,170,000		2,502,000		5,328,000
Cash collections during the year		1,885,000		2,600,000		5,515,000

Westgate recognizes revenue over time according to percentage of completion.

Problem 6-10 (Algo) Part 4

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	$	2,044,000	$	3,885,000	$	3,285,000
Estimated costs to complete as of year-end		5,256,000		3,185,000		0

Solve for "X"

	2021	2022	2023
Revenue	$2,800,000	X	X
Gross profit (loss)	$756,000	X	X

Please show you work, I've tried finding the answers to year 2022 and 2023 but nothing is working

Expert Solution

· Requirement 4 asked

	2021	2022	2023
Revenue	$2,800,000	$3,705,376	$3,494,624
Gross Profit (Loss)	$756,000	$130,000	($100,000)

--Working

Working		2021	2022	2023
A	Contract Price	$10,000,000	$10,000,000	$10,000,000
B	Cost Incurred to Date	$2,044,000	$5,929,000	$9,214,000
C	Estimated cost yet to be incurred to complete the contract	$5,256,000	$3,185,000	$0
D = B+C	Total Cost	$7,300,000	$9,114,000	$9,214,000
E = (B/D) x 100	% of Completion	28.00%	65.05%	100.00%

F = A x E	Revenue to date	$2,800,000	$6,505,376	$10,000,000
G	Revenue of Previous year	$0	$2,800,000	$6,505,376
H = F - G	Net Revenue this year	$2,800,000	$3,705,376	$3,494,624

I (=B)	Cost to date	$2,044,000	$5,929,000	$9,214,000
J	Cost to date of previous year	$0	$2,044,000	$5,929,000
K = I - J	Net Cost for the year	$2,044,000	$3,885,000	$3,285,000

L = A - D	Estimated Gross Profit (Loss)	$2,700,000	$886,000	$786,000

M	Gross Profit (Loss) to be recognised	$756,000	$130,000	($100,000)
		2800000 - 2044000	886000 - 756000	786000 - 886000

ekkarill92 answered 1 year ago

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