contestada

g 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 $2,624,000 $3,690,000 $2,074,600
Estimated costs to complete as of year-end 5,576,000 1,886,000 0
Billings during the year 2,200,000 4,114,000 3,686,000
Cash collections during the year 2,000,000 3,800,000 4,200,000

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

Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years.

Respuesta :

TomShelby

Answer:

Year 1:

3,200,000 - 2,624,000 = 576,000 gross profit

Year 2:

4,752,000 - 3,690,000 = 1,062 gross profit

Year 3:

2,048,000  -  2,074,600 = (26,600)

Explanation:

we will match the percentage of completion with the amount of revenue recognized.

Year 1:

2,624,000 / (2,624,000+ 5,576,000) = 0.32

Earned revenue : 10,000,000 x 0.32 = 3,200,000

Then, year 2:

3,690,000 / (3,690,000 + 1,886,000) = 0.661764706

Earned revenue 7,200,000 x 0.66% = 4752000

Finally year 3 we recognize the entire revenue missing

10,000,000 - 3,200,000 - 4,752,000 = 2,048,000

anthougo

Since Westgate Construction does not recognize revenue over time, the percentage of completion method will be used to determine the revenue and the gross profit (loss) to be recognized in each year, as detailed below.

                                                      2021               2022                2023

Revenue to be recognized  $3,200,000    $4,500,000     $2,300,000

Costs incurred for the year $2,624,000    $3,690,000     $2,074,600

Gross profit (loss)                  $576,000        $810,000       $225,400

Data and Calculations:

                                                      2021               2022                2023

Costs for the year                  $2,624,000    $3,690,000    $2,074,600

Estimated completion costs    5,576,000       1,886,000                      0

Total costs                             $8,200,000    $8,200,000    $8,388,600

Percentage of completion           32%                45%

For 2021, the percentage of completion = 32% ($2,624,000/$8,200,000 x 100)

For 2022, the percentage of completion = 45% ($3,690,000/$8,200,000 x 100)

Revenue to be recognized:

  • For 2021, the revenue to be recognized = $3,200,000 ($10,000,000 x 32%)
  • For 2022, the revenue to be recognized = $4,500,000 ($10,000,000 x 45%)
  • For 2023, the revenue to be recognized = $2,300,000 ($10,000,000 - $3,200,000 - $4,500,000)

Thus, the method of percentage of completion requires that the current costs are divided by the total costs (incurred and estimated to completion) to date, and then multiplied by 100.

Learn more: https://brainly.com/question/22485775

Otras preguntas