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 | $ | 2,072,000 | $ | 2,738,000 | $ | 2,849,000 | |||
Estimated costs to complete as of year-end | 5,328,000 | 2,590,000 | 0 | ||||||
Billings during the year | 2,160,000 | 2,650,000 | 5,190,000 | ||||||
Cash collections during the year | 1,880,000 | 2,700,000 | 5,420,000 | ||||||
Westgate recognizes revenue over time according to percentage of
completion.
Required:
1. Calculate the amount of revenue and gross
profit (loss) to be recognized in each of the three years.
particulars | 2021 | 2022 | 2023 | total |
cost incurred | 20,72,000.00 | 27,38,000.00 | 28,49,000.00 | 76,59,000.00 |
estimated cost to complte | 53,28,000.00 | 25,90,000.00 | 0.00 | |
billings during the year | 21,60,000.00 | 26,50,000.00 | 51,90,000.00 | 1,00,00,000.00 |
cash collections | 18,80,000.00 | 27,00,000.00 | 54,20,000.00 | 1,00,00,000.00 |
degree of completion | cost incurred till date / estimated costs to complte | |||
28% | 65% | 100% | ||
(2072000/(2072000+5328000) | (2072000+2738000)/2072000+2738000+2590000) | |||
contract price | 1,00,00,000.00 | |||
revenue | 28,00,000.00 | 37,00,000.00 | 35,00,000.00 | 1,00,00,000.00 |
costs | 20,72,000.00 | 27,38,000.00 | 28,49,000.00 | 76,59,000.00 |
profit | 7,28,000.00 | 9,62,000.00 | 6,51,000.00 | 23,41,000.00 |
THANKS IN ADVANCE FOR GIVING ME POSITIVE RATINGS | ||||
MAY GOD BLESS YOU | ||||
STAY HOME STAY SAFE | ||||
HAVE A WONDERFUL DAY | ||||