Business, 15.10.2020 08:01, arianna2814

In 2021, 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 2023. Information related to the contract is as follows: 2021 2022 2023
Cost incurred during the year $2,610,000 $3,162,000 $2,230,800
Estimated costs to complete as of year-end 6,390,000 2,028,000 0
Billings during the year 2,100,000 3,672,000 4,228,000
Cash collections during the year 1,850,000 3,000,000 5,150,000

Assume that Westgate Construction's contract with Santa Clara County does not qualify for revenue recognition over time.

Required:
a. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years.
b. Complete the information required below to prepare a partial balance sheet for 2021 and 2022 showing any items related to the contract.
c. 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.

Answers: 2

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answered: aidananderson

Westgate Construction Company

a) Amount of revenue and gross profit (loss) to be recognized in each year:

2021 2022 2023

Cost incurred during the year $2,610,000 $3,162,000 $2,230,800

Percentage of costs to the total 32.61% 39.51% 27.88%

Revenue recognized each year $3,261,000 $3,951,000 $2,788,000

Cost incurred during the year $2,610,000 $3,162,000 $2,230,800

Gross profit $651,000 $789,000 $557,200

b) Information for a partial balance sheet for 2021 and 2022

Current assets: 2021 2022

Accounts receivable (Santa Clara) $250,000 $922,000

Explanation:

a) Data and Calculations:

2021 2022 2023

Cost incurred during the year $2,610,000 $3,162,000 $2,230,800

Estimated costs to complete

as of year-end 6,390,000 2,028,000 0

Billings during the year 2,100,000 3,672,000 4,228,000

Cash collections during the year 1,850,000 3,000,000 5,150,000

Contract price = $10,000,000

Total costs incurred = $8,002,800

Total Gross profit = $1,997,200

Since Westgate Construction's contract with Santa Clara Country does not qualify for revenue recognition over time, revenue can only be recognized based on degree of completion or percentage of completion. This is based on the costs incurred in each year.

2021 2022 2023

Cost incurred during the year $2,610,000 $3,162,000 $2,230,800

Percentage of costs to the total 32.61% 39.51% 27.88%

Revenue recognized each year $3,261,000 $3,951,000 $2,788,000

Cost incurred during the year $2,610,000 $3,162,000 $2,230,800

Gross profit $651,000 $789,000 $557,200

a) Accounts Receivable (Santa Clara)

Date Accounts Title Debit Credit

2021 Construction Contract $2,100,000

2021 Cash Account $1,850,000

2021 Balance 250,000

2022 Balance 250,000

2022 Construction Contract $3,672,000

2022 Cash Account $3,000,000

2022 Balance 922,000

Construction Contract

Date Accounts Title Debit Credit

2021 Cash account $2,610,000

2021 Accounts receivable $2,100,000

2022 Cash account $3,162,000

2022 Accounts receivable $3,672,000

$5,772,000 $5,772,000

Cash Account

Date Accounts Title Debit Credit

2021 Construction Contract $2,610,000

2021 Accounts receivable $1,850,000

2022 Construction Contract $3,162,000

2022 Accounts receivable $3,000,000

answered: Guest

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In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa Cla...