Problem 5-10 Long-term contract; revenue recognition over time [LO5-8, 5-9] [The
ID: 2397717 • Letter: P
Question
Problem 5-10 Long-term contract; revenue recognition over time [LO5-8, 5-9] [The following information applies to the questions displayed below.] 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 $ 2,604,000 $ 4,032,000 $ 1,940,400 Estimated costs to complete as of year-end 5,796,000 1,764,000 0 Billings during the year 2,040,000 4,596,000 3,364,000 Cash collections during the year 1,820,000 4,000,000 4,180,000 Westgate recognizes revenue over time according to percentage of completion. rev: 09_15_2017_QC_CS-99734 Problem 5-10 Part 4 4. 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. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.) 2018 2019 2020 Cost incurred during the year $ 2,604,000 $ 3,820,000 $ 3,220,000 Estimated costs to complete as of year-end 5,796,000 3,120,000 0 rev: 10_02_2017_QC_CS-99734
Explanation / Answer
Solution Part 4:
Computation of % of completion, revenue recognition and Gross Profit - Westgate Construction Company Year Actual cost incurred (A) Total cost incurred till date (B) Total estimated Cost ( C ) % of completion (D) (B/C) Contract Price(E) Total Revenue to be recoganized (F) (E * D) Revenue for current period (G) Gross Profit (H) (G - A) 2018 $2,604,000.00 $2,604,000.00 $8,400,000.00 31.00% $10,000,000 $3,100,000 $3,100,000 $496,000 2019 $3,820,000.00 $6,424,000.00 $9,544,000.00 67.31% $10,000,000 $6,730,930 $3,630,930 -$189,070 2020 $3,220,000.00 $9,644,000.00 $9,644,000.00 100.00% $10,000,000 $10,000,000 $3,269,070 $49,070
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