In 2018, the Westgate Construction Company entered into a contract to construct
ID: 2407105 • 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 $ 2,490,000 $ 3,984,000 $ 2,008,600 Estimated costs to complete as of year-end 5,810,000 1,826,000 0 Billings during the year 2,030,000 4,444,000 3,526,000 Cash collections during the year 1,815,000 3,900,000 4,285,000 Westgate recognizes revenue over time according to percentage of completion. rev: 09_15_2017_QC_CS-99734 Required: 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
Computation of % Completion & Gross Profit 2018 2019 2020 Contract price $10,000,000 $10,000,000 $10,000,000 Estimated cost: Cost To date $2,490,000 $6,474,000 $8,482,600 Estimated costs To Complete $5,810,000 $1,826,000 Estimated Total costs $8,300,000 $8,300,000 $8,482,600 % Completed 30% 78% 100% Estimated Total gross profit $1,700,000 $1,700,000 $1,517,400 Total Gross profit To be Recognized $510,000 $1,326,000 $1,517,400 Gross profit Recognized in Previous years $0 $510,000 $1,326,000 Gross profit Recognized during the current year $510,000 $816,000 $191,400