Question: Problem 6-11 (Algo) Long-term contract; revenue recognition upon completion [LO6-9] In 2021, the Westgate Construction Company entered into a contract to construct a road for
Problem 6-11 (Algo) Long-term contract; revenue recognition upon completion [LO6-9]
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 | $ | 1,491,000 | $ | 3,195,000 | $ | 2,655,400 | |||||
| Estimated costs to complete as of year-end | 5,609,000 | 2,414,000 | 0 | ||||||||
| Billings during the year | 1,100,000 | 3,586,000 | 5,314,000 | ||||||||
| Cash collections during the year | 900,000 | 2,700,000 | 6,400,000 | ||||||||
Assume that Westgate Constructions contract with Santa Clara County does not qualify for revenue recognition over time. Required: 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.
| 2021 | 2022 | 2023 | |||||||||
| Cost incurred during the year | $ | 2,590,000 | $ | 3,895,000 | $ | 3,290,000 | |||||
| Estimated costs to complete as of year-end | 5,790,000 | 3,290,000 | 0 | ||||||||
5. 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.
| 2021 | 2022 | 2023 | |||||||||
| Cost incurred during the year | $ | 2,590,000 | $ | 3,895,000 | $ | 4,185,000 | |||||
| Estimated costs to complete as of year-end | 5,790,000 | 4,290,000 | 0 | ||||||||
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts