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	$	2,059,000		$	2,627,000		$	2,655,400
Estimated costs to complete as of year-end		5,041,000			2,414,000			0
Billings during the year		2,190,000			2,496,000			5,314,000
Cash collections during the year		1,895,000			2,400,000			5,705,000

Westgate recognizes revenue over time according to percentage of completion.

3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 showing any items related to the contract. (Do not round intermediate calculations.)

Answer 1

1) Calculation of Amount of revenue and gross profit to be recognized 2018 2019 2020 Contract price (A) 10,000,000 10,000,000 10,000,000 Cost incurred during the year 2,059,000 2,627,000 2,655,400 Add: Previous year cost incurred 4,686,000 2,059,000 Cost incurred till date (B) Estimated Cost to complete (C) 2,059,000 4,686,000 7,341,400 5,041,000 2,414,000 Total Estimated Cost [D- (B+C)] 7,100,000 7,100,000 7,341,400 % Completed (E-B/D) 29.00% 66.00% 100.00% Revenue (Ax E) 10,000,000 2,900,000 6,600,000 (2,900,000) Less: Total Revenue recognized till previous (6,600,000) Revenue recognized during the current year 2,900,000 3,700,000 3,400,000 (2,627,000) (2,655,400) Less: Cost incurred during the current year (2,059,000) Gross Profit Recognized This Year 841,000 1,073,000 744,600 2018 2019 2020 3,400,000 Revenue 2,900,000 3,700,000 Gross Profit 841,000 1,073,000 744,600

3) Balance Sheet (Partial) 2018 2019 Current Assets: Accounts Receivable 295,000 391,000 Construction cost in progress 2,900,000 6,600,000 Less: Billings (2,190,000) (4,686,000) Cost and profit in excess of billings 710,000 1,914,000 Current Liabilities: Working Notes: Accounts receivable in 2018 Billings 2,190,000 Less: Cash Collections (1,895,000) Accounts receivable as on 12/31/2018 295,000 Accounts receivable in 2019 Accounts receivable as on 12/31/2018 295,000 Billings 2,496,000 Less: Cash Collections (2,400,000) Accounts receivable as on 12/31/2018 391,000 Billings 2018 2019 Billings during the current year Add: Previous year billings Total Billings 2,190,000 2,496,000 2,190,000 2,190,000 4,686,000 Construction in progress is total revenue recognized.