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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:

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.)

2018 2019 2020 Cost incurred during the year $ 2,072,000 $ 2,738,000 $ 2,849,000 Estimated costs to complete as of year-end 5,328,000 2,590,000 0 Billings during the year 2,160,000 2,650,000 5,190,000 Cash collections during the year 1,880,000 2,700,000 5,420,000 View transaction list View journal entry worksheet No Transaction General Journal Debit Credit Cash 105,600 Accounts receivable 26,400 105,600 26,400 Sales revenue Deferred revenue - loyalty points Cash Accounts receivable Deferred revenue - loyalty points 79,200 26,400 21,120 Sales revenue 126,720

Explanation / Answer

2018

2019

2020

Revenue

$28,00,000

$23,00,000

$49,00,000

Gross Profit / (Loss)

$7,28,000

$16,54,720

$54,96,280

Percentage of Completion Method

                                                                   2018           2019           2020

(A) Costs incurred to date                          20,72,000   27,38,000 28,49,000

Estimated future costs 53,28,000   25,90,000 0

(B) Estimated total costs                            74,00,000 53,28,000 28,49,000

(C) Est. total gross profit(1,00,00,000 - B) 26,00,000   46,72,000 71,51,000

(D) Percent Complete (A/B)                       28%            51%            100%

Rev. Recog. to Date (10000000*D) 28,00,000   51,00,000   1,00,00,000

Current Yr. Revenue Recognized 28,00,000 23,00,000   49,00,000

Total GP Recognized to Date (C*D)           7,28,000     23,82,720 71,51,000

Current Yr. Gross Profit Recognized 7,28,000     16,54,720   54,96,280

2018

2019

2020

Revenue

$28,00,000

$23,00,000

$49,00,000

Gross Profit / (Loss)

$7,28,000

$16,54,720

$54,96,280

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