Question

In 2021, 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 2023. Information related to the contract is as follows: 2021 2022 2023 Cost incurred during the year $2,550,000 $4,250,000 $ 1,870,000 Estimated costs to complete as of year-end 5,950,000 1,700,000 0 Billings during the year 2,050,000 4,750,000 3,200,000 Cash collections during the year 1,825,000 4,100,000 4,075,000 Westgate recognizes revenue over time according to percentage of completion.

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.)

2021 2022 2023
Revenue

Gross profit (loss)

Answer 1

• Requirement 1

	2021	2022	2023
Revenue	$       3,000,000.00	$       5,000,000.00	$          2,000,000.00
Gross Profits (Loss)	$           450,000.00	$          750,000.00	$              130,000.00

• Working

Working		2021	2022	2023
A	Contract Price	$     10,000,000.00	$    10,000,000.00	$        10,000,000.00
B	Cost Incurred to Date	$       2,550,000.00	$       6,800,000.00	$          8,670,000.00
C	Estimated cost yet to be incurred to complete the contract	$       5,950,000.00	$       1,700,000.00	$                                -
D = B+C	Total Cost	$       8,500,000.00	$       8,500,000.00	$          8,670,000.00
E = (B/D) x 100	% of Completion	30.00%	80.00%	100.00%
F = A x E	Revenue to date	$       3,000,000.00	$       8,000,000.00	$        10,000,000.00
G	Revenue of Previous year	$                            -	$       3,000,000.00	$          8,000,000.00
H = F - G	Net Revenue this year	$       3,000,000.00	$       5,000,000.00	$          2,000,000.00
I (=B)	Cost to date	$       2,550,000.00	$       6,800,000.00	$          8,670,000.00
J	Cost to date of previous year	$                            -	$       2,550,000.00	$          6,800,000.00
K = I - J	Net Cost for the year	$       2,550,000.00	$       4,250,000.00	$          1,870,000.00
L = H - K	Gross Profits	$           450,000.00	$          750,000.00	$              130,000.00