Question

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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	$	2,604,000		$	4,032,000		$	1,940,400
Estimated costs to complete as of year-end		5,796,000			1,764,000			0
Billings during the year		2,040,000			4,596,000			3,364,000
Cash collections during the year		1,820,000			4,000,000			4,180,000

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. (Do not round intermediate calculations. Loss amounts should be indicated with a minus sign.)

2021. 2022. 2023

Revenue

Gross profit(loss)

Answer 1

• Requirement 1

	2021	2022	2023
Revenue	$       3,100,000.00	$       4,800,000.00	$          2,100,000.00
Gross Profits	$           496,000.00	$          768,000.00	$              159,600.00

Working		2021	2022	2023
A	Contract Price	$     10,000,000.00	$    10,000,000.00	$        10,000,000.00
B	Cost Incurred to Date	$       2,604,000.00	$       6,636,000.00	$          8,576,400.00
C	Estimated cost yet to be incurred to complete the contract	$       5,796,000.00	$       1,764,000.00	$                                -
D = B+C	Total Cost	$       8,400,000.00	$       8,400,000.00	$          8,576,400.00
E = (B/D) x 100	% of Completion	31.00%	79.00%	100.00%
F = A x E	Revenue to date	$       3,100,000.00	$       7,900,000.00	$        10,000,000.00
G	Revenue of Previous year	$                            -	$       3,100,000.00	$          7,900,000.00
H = F - G	Net Revenue this year	$       3,100,000.00	$       4,800,000.00	$          2,100,000.00
I (=B)	Cost to date	$       2,604,000.00	$       6,636,000.00	$          8,576,400.00
J	Cost to date of previous year	$                            -	$       2,604,000.00	$          6,636,000.00
K = I - J	Net Cost for the year	$       2,604,000.00	$       4,032,000.00	$          1,940,400.00
L = H - K	Gross Profits	$           496,000.00	$          768,000.00	$              159,600.00