Required Information [The following information applies to the questions display

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Required Information [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 2,640,000 $2,300,000 $2,926,000 2020 Cost incurred during the year Estimated costs to complete as of year-end6,160,000 2,660,000 Billings during the year Cash collections during the year 2, 080,000 2,860,0005,060,000 1,840,000 2, 800,000 ,360,000 Westgate recognizes revenue over time according to percentage of completion. 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 2020 2019 $2,640,000 $3,840,000 $3,240,000 Cost incurred during the year Estimated costs to complete as of year-end 6,160,000 3,140,000 2018 2019 2020 Gross profit (loss)

Explanation / Answer

Revenue recognised in a period = Total Contract value * Percentage of work completed in the period Percentage of work completed = Expenditure Incurred from Inception to date / Total estimated cost for the project Percentage of work completed in 2018 = $2640000 / ($2640000 + $6160000) = 30% Percentage of work completed till 2019 = ($2640000+3840000) / ($2640000 + $3840000 + $3140000) = 67.36% Percentage of work in completed till 2020 = 100% 2018 2019 2020 Total Contract Value $10,000,000 $10,000,000 $10,000,000 x Percentage of work completed 30.00% 37.4% 32.64% Revenue Recognised $3,000,000 $3,735,967 $3,264,033 Less : Cost Incurred $2,640,000.00 $3,840,000.00 $3,240,000.00 Gross Profit / (Loss) $360,000 -$104,033 $24,033

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