In 2018, the Westgate Construction Company entered into a contract to construct
ID: 2533531 • 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
$
2,580,000
$
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
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
Explanation / Answer
5. Calculation of the amount of revenue and gross profit (loss) to be recognized in each of the three years
2018
2019
2020
(A) Costs incurred to date
2,580,000
3,830,000
3,990,000
Estimated future costs
6,020,000
4,160,000
-
(B) Estimated total costs
8,600,000
7,990,000
3,990,000
(C) Est. total gross profit
(1,00,00,000 - B)
1,400,000
2,010,000
6,010,000
(D) Percent Complete (A/B)
30 %
48 %
100 %
Rev. Recog. to Date (1,00,00,000*D)
3,000,000
4,793,492
10,000,000
Current Yr. Revenue Recognized
3,000,000
1,793,492
5,206,508
Total GP Recognized to Date (C*D)
420,000
963,492
6,010,000
Current Yr. Gross Profit Recognized
420,000
543,492
5,046,508
Amount of Revenue recognised
2018 = $3,000,000
2019 = $1,793,492
2020 = $5,206,508
Amount of Gross Profit recognised
2018 = $ 420,000
2019 = $ 543,492
2020 = $ 5,046,508
2018
2019
2020
(A) Costs incurred to date
2,580,000
3,830,000
3,990,000
Estimated future costs
6,020,000
4,160,000
-
(B) Estimated total costs
8,600,000
7,990,000
3,990,000
(C) Est. total gross profit
(1,00,00,000 - B)
1,400,000
2,010,000
6,010,000
(D) Percent Complete (A/B)
30 %
48 %
100 %
Rev. Recog. to Date (1,00,00,000*D)
3,000,000
4,793,492
10,000,000
Current Yr. Revenue Recognized
3,000,000
1,793,492
5,206,508
Total GP Recognized to Date (C*D)
420,000
963,492
6,010,000
Current Yr. Gross Profit Recognized
420,000
543,492
5,046,508