Question

Check my work 5 Required information [The following information applies to the questions displayed below.] Part 1 of 5 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: 6 points Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year 2021 $2,059,000 5,041,000 2,190,000 1,895,000 2022 $2,627,000 2,414,000 2,496,000 2,400,000 2023 $2,655,400 0 5,314,000 5,705,000 eBook Print References 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.)

Answer 1

Calculation of Revenue and Gross Profit to be recognised

	2021	2022	2023
Revenue	2900000	3700000	3400000
Gross Profit	841000	1073000	744600

Year 2021

Estimated Total Costs = Cost incurred till date +Estimated cost to complete

Estimated Total Costs = 2059000 +5041000 =7100000

% of completion =2059000/7100000*100 =29%

Revenue =10000000*29% =$2900000

Gross Profit =Revenue - Cost incurred

Gross Profit =2900000 -2059000 =$841000

Year 2022

Estimated Total Costs = Cost incurred till date +Estimated cost to complete

Estimated Total Costs =2059000+ 2627000 + 2414000=$7100000

% of completion =(2059000+2627000)/7100000*100 =66%

Revenue =10000000*66%=$6600000
but $2900000 already recognised in 2021. Hence Revenue recognised in 2022 will be =6600000-2900000=$3700000

Gross Profit =3700000 -2627000 =$1073000

Year 2023

Estimated Total Costs = Cost incurred till date +Estimated cost to complete

Estimated Total Costs =2059000+2627000+2655400+0 =$7341400

% of Completion =7341400/7341400*100 =100%

Revenue =10000000*100%=$10000000 but $6600000 already recognised in 2021. Hence Revenue recognised in 2023 will be =10000000-6600000=$3400000

Gross Profit = 3400000 -2655400 =$744600