Question

In: Accounting

In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa...

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

Solutions

Expert Solution

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

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


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