n 2013, the Westgate Construction Company entered into a contract to construct a
ID: 2459124 • Letter: N
Question
n 2013, 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 2015. Information related to the contract is as follows:
2013 2014 2015
Cost incurred during the year $ 3,471,000 $ 4,005,000 $ 1,566,400
Estimated costs to complete as of year-end 5,429,000 1,424,000 0
Billings during the year 2,900,000 4,576,000 2,524,000
Cash collections during the year 2,610,000 4,500,000 2,890,000
Westgate uses the percentage-of-completion method of accounting for long-term construction contracts.
Calculate the amount of gross profit (loss) to be recognized in each of the three years. (Do not round intermediate calculations.)
Explanation / Answer
Total profit on the contract = Total value of contract - Total cost incurred on contract
= $10,000,000 - $9,042,400 = $957,600
Particulars Year 2013 Year 2014 Year 2015 cost incurred during the year ($) (A) 3471000 4005000 1566400 Estimated costs to complete as of year-end 5429000 1424000 0 Total estimated cost of the contract ($) (B) 8,900,000 Percentage of completion on Total cost incurred to date / Total estimated cost of the contract i.e.[ (A) / (B) ] 39% 45% 16% (balance) Gross profit (loss) to be recognized of Total profit of $ 957,600 $373,464 $430,920 $153,216Related Questions
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