In 2018, the Westgate Construction Company entered into a contract to construct
ID: 2393862 • Letter: I
Question
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 $ 2,581,000 $ 2,347,000 $ 3,049,200 Estimated costs to complete as of year-end 6,319,000 2,772,000 0 Billings during the year 2,090,000 2,838,000 5,072,000 Cash collections during the year 1,845,000 2,900,000 5,255,000 Westgate recognizes revenue over time according to percentage of completion.
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.)
Explanation / Answer
Total Estimated Revenue = 10000000
2017
2018
2019
Cost incurred to date (A)
2581000
(2581000 + 2347000)
=4928000
(3049200 + 4928000)
=7977200
Estimated cost (B)
6319000
2772000
0
Estimated Total cost
(C = A+B)
8902017
7700000
7977200
% complete (D=A/C)
29%
64%
100%
Billings
2090000
2838000
5072000
Cash collected
1845000
2900000
5255000
Revenue Recognised (E)
(10000000 * 29%)
2900000
(10000000 * 64%)
6400000
(10000000 * 100%)
10000000
Total Income/Loss recognized (E – A)
319000
1472000
2022800
Income/Loss recognized this year
319000
(1472000 – 319000)
=1153000
(2022800 – 319000 – 1153000)
=550800
2017
2018
2019
Cost incurred to date (A)
2581000
(2581000 + 2347000)
=4928000
(3049200 + 4928000)
=7977200
Estimated cost (B)
6319000
2772000
0
Estimated Total cost
(C = A+B)
8902017
7700000
7977200
% complete (D=A/C)
29%
64%
100%
Billings
2090000
2838000
5072000
Cash collected
1845000
2900000
5255000
Revenue Recognised (E)
(10000000 * 29%)
2900000
(10000000 * 64%)
6400000
(10000000 * 100%)
10000000
Total Income/Loss recognized (E – A)
319000
1472000
2022800
Income/Loss recognized this year
319000
(1472000 – 319000)
=1153000
(2022800 – 319000 – 1153000)
=550800
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