Required information Problem 5-10 Long-term contract; revenue recognition over t
ID: 2591444 • Letter: R
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Required information Problem 5-10 Long-term contract; revenue recognition over time [LO5-8, 5-9] The following information applies to the questions displayed below. 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 2019 $2,640,000 $2,300,000 $2,926,000 2,660,000 2018 2020 Cost incurred during the year Estimated costs Billings during the year Cash collections during the year to complete as of year-end 6,16 2,08 0,000 0,000 2,860,000 5,060,000 1,840,000 2,800,000 5,360,000 Westgate recognizes revenue over time according to percentage of completion. Problem 5-10 Part 1Explanation / Answer
2018
2019
2020
Cost incurred during the year
2640000
2300000
2926000
Estimated cost to complete
6160000
2660000
0
Degree of Completion = Cost incurred till date/Total cost
2640000/(2640000 + 6160000) *100 = (2640000/8800000) *100 = 30%
(2640000+2300000)/ 2640000+2300000+ 2660000 *100 = (4940000/7600000)*100 = 65%
100%
Total Revenue
10000000*30% = 3000000
10000000*65% = 6500000
10000000*100% = 10000000
Revenue for the particular year
3000000
6500000 – 3000000 = 3500000
10000000 – 3000000 – 3500000 = 3500000
Gross Profit /Loss
3000000 – 2640000 = 360000
3500000 – 2300000 = 1200000
3500000 – 2926000 = 574000
2018
2019
2020
Cost incurred during the year
2640000
2300000
2926000
Estimated cost to complete
6160000
2660000
0
Degree of Completion = Cost incurred till date/Total cost
2640000/(2640000 + 6160000) *100 = (2640000/8800000) *100 = 30%
(2640000+2300000)/ 2640000+2300000+ 2660000 *100 = (4940000/7600000)*100 = 65%
100%
Total Revenue
10000000*30% = 3000000
10000000*65% = 6500000
10000000*100% = 10000000
Revenue for the particular year
3000000
6500000 – 3000000 = 3500000
10000000 – 3000000 – 3500000 = 3500000
Gross Profit /Loss
3000000 – 2640000 = 360000
3500000 – 2300000 = 1200000
3500000 – 2926000 = 574000
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