2 Requireo inrormation Problem 5-10 Long-term contract: revenue recognition over

Question

2 Requireo inrormation Problem 5-10 Long-term contract: revenue recognition over time [LO5-8,5-9) The following information applies to the questions displayed below) 2Problem 5-10 Long-term contract: revenue recogniton 4 of 5 In 2018, $10,000,000. The road was completed in 2020. Information related to the contract is as follows: the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for Cost incurred during the year Estimated costs to complete as of year-end Bi11ings during the year Cash collections during the year 2018 6,319,000 2019 2020 $2,581,000 $2.347,000 $3,049,200 2,772.000 2, 090,000 1, 845, 000 2, 838, 000 5,072,000 2,900,0005,255,000 Westgate recognizes revenue over time according to percentage of completion 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 whole dollar omount. Loss amounts should be indicated with a minus sign.) information. (Do not round intermediate calculations and round your final answers to the nearest 2019 $2,581,000 $3,845,000 $3,245,0oo 2018 2020 Cost incurred during the year Estimated costs to cosplete as of year-end 6,319,000 3,145,000 20182019 2020 Revenue Gross profit (loss)

Explanation / Answer

Answer - 5-10 Calculation of revenue and Gross Profit using percentage of completion method 2018 2019 2020 Total Contract Value $10,000,000.00 $10,000,000.00 $10,000,000.00 x Percentage of work completed during the year 29% 35% 36% Revenue Recognised $2,900,000.00 $3,500,000.00 $3,600,000.00 x Gross profit % 20.228% 20.228% 20.228% Gross profit $586,612.00 $707,980.00 $728,208.00 Working Revenue recognised during the year = Percentage of work completed in the period / Total Contract value Percentage of work completed = Expenditure incurred from Inception to date / Total Estimated costs for the contract Percentage of work completed in Year 2018 = $2581000 / ($2581000 + $6319000) = 29% Percentage of work completed in Year 2019 = ($2581000+$2347000) / ($2581000 + $2347000 + $2772000) = 64% Percentage of work completed in Year 2020 = 100% Gross profit Percentage = (Total Contract value - Total cost incurred on the project) / Total Contract value Gross profit Percentage = ($1,00,00,000 - $79,77,200) / $1,00,00,000 = 20.228% Answer - 5-10 Part 4 Calculation of revenue and Gross Profit using percentage of completion method 2018 2019 2020 Total Contract Value $10,000,000.00 $10,000,000.00 $10,000,000.00 x Percentage of work completed during the year 29.00% 38.14% 32.86% Revenue Recognised $2,900,000 $3,814,032 $3,285,968 x Gross profit % 3.290% 3.290% 3.290% Gross profit $95,410 $125,482 $108,108 Working Revenue recognised during the year = Percentage of work completed in the period / Total Contract value Percentage of work completed = Expenditure incurred from Inception to date / Total Estimated costs for the contract Percentage of work completed in Year 2018 = $2581000 / ($2581000 + $6319000) = 29% Percentage of work completed in Year 2019 = ($2581000+$3845000) / ($2581000 + $3845000 + $3145000) = 67.14% Percentage of work completed in Year 2020 = 100% Gross profit Percentage = (Total Contract value - Total cost incurred on the project) / Total Contract value Gross profit Percentage = ($1,00,00,000 - $96,71,000) / $1,00,00,000 = 3.29%

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.