In: Accounting
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.
Required:
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.
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 |
||||||
2018 |
2019 |
2020 |
||
Revenue |
$ 3,000,000.00 |
$ 4,700,000.00 |
$ 2,300,000.00 |
|
Gross Profits |
$ 420,000.00 |
$ 658,000.00 |
$ 124,200.00 |
Working |
2018 |
2019 |
2020 |
|
A |
Contract Price |
$ 10,000,000.00 |
$ 10,000,000.00 |
$ 10,000,000.00 |
B |
Cost Incurred to Date |
$ 2,580,000.00 |
$ 6,622,000.00 |
$ 8,797,800.00 |
C |
Estimated cost yet to be incurred to complete the contract |
$ 6,020,000.00 |
$ 1,978,000.00 |
$ - |
D = B+C |
Total Cost |
$ 8,600,000.00 |
$ 8,600,000.00 |
$ 8,797,800.00 |
E = (B/D) x 100 |
% of Completion |
30.00% |
77.00% |
100.00% |
F = A x E |
Revenue to date |
$ 3,000,000.00 |
$ 7,700,000.00 |
$ 10,000,000.00 |
G |
Revenue of Previous year |
$ - |
$ 3,000,000.00 |
$ 7,700,000.00 |
H = F - G |
Net Revenue this year |
$ 3,000,000.00 |
$ 4,700,000.00 |
$ 2,300,000.00 |
I (=B) |
Cost to date |
$ 2,580,000.00 |
$ 6,622,000.00 |
$ 8,797,800.00 |
J |
Cost to date of previous year |
$ - |
$ 2,580,000.00 |
$ 6,622,000.00 |
K = I - J |
Net Cost for the year |
$ 2,580,000.00 |
$ 4,042,000.00 |
$ 2,175,800.00 |
L = H - K |
Gross Profits |
$ 420,000.00 |
$ 658,000.00 |
$ 124,200.00 |