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Long-term contract; revenue recognition upon project completion; loss projected on entire project
• LO5–8, LO5–9
[This is a variation of E 5–19 focusing on the revenue recognition upon project completion.]
On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,000,000. During 2018, costs of $2,000,000 were incurred, with estimated costs of $4,000,000 yet to be incurred. Billings of $2,500,000 were sent, and cash collected was $2,250,000.
In 2019, costs incurred were $2,500,000 with remaining costs estimated to be $3,600,000. 2019 billings were $2,750,000, and $2,475,000 cash was collected. The project was completed in 2020 after additional costs of $3,800,000 were incurred. The company’s fiscal year-end is December 31. This project does not qualify for revenue recognition over time.
Required:
1. Calculate the amount of gross profit or loss to be recognized in each of the three years.
2. Prepare
3. Prepare a partial
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Chapter 5 Solutions
GEN COMBO LOOSELEAF INTERMEDIATE ACCOUNTING; CONNECT ACCESS CARD
- Required information Problem 6-10 (Algo) Long-term contract; revenue recognition over time [LO6-8, 6-9] [The following information applies to the questions displayed below.] 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: Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year Westgate recognizes revenue over time according to percentage of completion. Costs incurred during the year Estimated costs to complete as of year-end Revenue Gross profit (loss) 2021 $2,044,000 5,256,000 2,170,000 1,885,000 $ $ Problem 6-10 (Algo) 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 information. (Do not round intermediate calculations and round…arrow_forwardRequired information Problem 6-10 (Algo) Long-term contract; revenue recognition over time [LO6-8, 6-9] [The following information applies to the questions displayed below.] 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: Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year Westgate recognizes revenue over time according to percentage of completion. Balance Sheet (Partial) Current assets: 2022 2021 $2,044,000 5,256,000 2,628,000 $2,628,000 2,170,000 2,502,000 1,885,000 2,600,000 Current liabilities: Problem 6-10 (Algo) Part 3 3. Complete the information required below to prepare a partial balance sheet for 2021 and 2022 showing any items related to the contract. (Do not round intermediate calculations.) 2021 0 2023 $2,890,800 2022 0 5,328,000…arrow_forwardRequired information Problem 6-10 (Algo) Long-term contract; revenue recognition over time [LO6-8, 6-9] [The following information applies to the questions displayed below.] 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: Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year Problem 6-10 (Algo) Part 1 Westgate recognizes revenue over time according to percentage of completion. Revenue Gross profit (loss) 2021 $2,044,000 5,256,000 2,170,000 1,885,000 X Answer is complete but not entirely correct. 2022 3,600,000 $ $ $ 2021 2,800,000 $ 756,000 $ 972,000 2022 $2,628,000 2,628,000 2,502,000 2,600,000 Required: 1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. (Do not round intermediate calculations.…arrow_forward
- Required information Problem 6-10 (Algo) Long-term contract; revenue recognition over time [LO6-8, 6-9] [The following information applies to the questions displayed below.] In 2024, 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 2026. Information related to the contract is as follows: Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year Westgate recognizes revenue over time according to percentage of completion. Costs incurred during the year Estimated costs to complete as of year-end Revenue Gross profit (loss) $ $ Problem 6-10 (Algo) Part 5 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. Answer is complete but not entirely correct. 2024 2024 $ 2,016,000 5,184,000 2,180,000 1,890,000…arrow_forwardRequired Information Problem 6-10 (Algo) Long-term contract; revenue recognition over time [LO6-8, 6-9] [The following Information applies to the questions displayed below.] In 2024, 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 2026. Information related to the contract is as follows: 2025 Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year 2024 2026 $ 2,490,000 5,810,000 2,030,000 $ 3,984,000 $ 2,008,600 1,826,000 в 4,444,000 3,900,000 3,526,000 4,285,000 1,815,000 Westgate recognizes revenue over time according to percentage of completion. Problem 6-10 (Algo) 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 Information. Note: Do not round Intermediate calculations and round your final…arrow_forwardS Required information Problem 6-10 (Algo) Long-term contract; revenue recognition over time [LO6-8, 6-9] [The following information applies to the questions displayed below.] In 2024, 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 2026. Information related to the contract is as follows: Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year Westgate recognizes revenue over time according to percentage of completion. Problem 6-10 (Algo) Part 3 Balance Sheet (Partial) Current assets: 2024 2025 $ 2,523,000 $ 3,177,000 6,177,000 1,800,000 2,070,000 3,630,000 1,835,000 3,400,000 Current liabilities: 3. Complete the information required below to prepare a partial balance sheet for 2024 and 2025 showing any items related t contract. Note: Do not round intermediate calculations. 2024 2026 $ 1,980,000 2025 0 4,300,000…arrow_forward
- Required information Problem 6-10 (Algo) Long-term contract; revenue recognition over time [LO6-8, 6-9] [The following information applies to the questions displayed below.] In 2024, 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 2026. Information related to the contract is as follows: Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year Westgate recognizes revenue over time according to percentage of completion. Balance Sheet (Partial) Current assets: Current liabilities: Problem 6-10 (Algo) Part 3 3. Complete the information required below to prepare a partial balance sheet for 2024 and 2025 showing any items related to the contract. Note: Do not round Intermediate calculations. 2024 2024 $ 2,490,000 5,810,000 2,030,000 1,815,000 0 2025 $ 3,984,000 1,826,000 4,444,000 3,900,000 0 2025 0 2026 $ 2,008, 600 0 0…arrow_forward! Required information Problem 6-10 (Static) Long-term contract; revenue recognition over time [LO6-8, 6-9] [The following information applies to the questions displayed below.] In 2024, 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 2026. Information related to the contract is as follows: Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year Westgate recognizes revenue over time according to percentage of completion. Costs incurred during the year Estimated costs to complete as of year-end Revenue Gross profit (loss) 2024 Problem 6-10 (Static) Part 5 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. $ Note: Do not round intermediate calculations and round your final answers to the nearest…arrow_forwardof 5 Required information Problem 6-10 (Algo) Long-term contract; revenue recognition over time [LO6-8, 6-9] [The following information applies to the questions displayed below.] 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: Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year Westgate recognizes revenue over time according to percentage of completion. Problem 6-10 (Algo) Part 1 Revenue Gross profit (loss) $ $ 2022 2021 $2,044,000 $2,628,000 5,256,000 2,628,000 2,170,000 2,502,000 1,885,000 2,600,000 Answer is not complete. 2022 2,200,000 $ 1,868,000 X Required: 1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. (Do not round intermediate calculations. Loss amounts should be indicated with a…arrow_forward
- Exercise 6-23 (Algo) Income (loss) recognition; Long-term contract; revenue recognition over time vs. upon project completion [LO6-9] Brady Construction Company contracted to build an apartment complex for a price of $6,500,000. Construction began in 2024 and was completed in 2026. The following is a series of independent situations, numbered 1 through 6, involving differing costs for the project. All costs are stated in thousands of dollars. Situation HNm tin v 2 3 4 5 6 Costs Incurred during Year 2024 2025 2026 $ 1,350 $ 1,650 $ 2,580 1,650 3,000 1,650 2,800 650 1,300 650 650 1,350 2,580 3,150 3,150 3,150 2,350 3,300 Estimated Costs to Complete (As of the End of the Year) 2024 2026 2025 $ 1,350 3,000 2,700 950 $ 3,930 3,930 3,930 4,550 4,550 6,055 2,700 3,050 Required: Complete the following table. Note: Do not round intermediate calculations. Enter your answers in whole dollars and not in thousands of dollars (i.e., $400 thousand should be entered as $400,000). Round your final…arrow_forwardProblem 6-10 (Algo) Long-term contract; revenue recognition over time [LO6-8, 6-9] [The following information applies to the questions displayed below.] 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: Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year Westgate recognizes revenue over time according to percentage of completion. Costs incurred during the year Estimated costs to complete as of year-end Revenue Gross profit (loss) 2021 2022 $2,044,000 $2,628,000 5,256,000 2,628,000 2,170,000 2,502,000 1,885,000 2,600,000 Problem 6-10 (Algo) Part 5 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. (Do not round intermediate…arrow_forwardProblem 6-10 (Algo) Long-term contract; revenue recognition over time [LO6-8, 6-9] [The following information applies to the questions displayed below.] 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: Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year Problem 6-10 (Algo) Part 3 Westgate recognizes revenue over time according to percentage of completion. Balance Sheet (Partial) Current assets: Accounts receivable Construction in progress 2021 $2,044,000 5,256,000 2,170,000 1,885,000 Less: Billings Costs and profit in excess of billings Current liabilities: Construction in progress 2021 2022 $2,628,000 2,628,000 2,502,000 2,600,000 3. Complete the information required below to prepare a partial balance sheet for 2021 and 2022 showing any items…arrow_forward
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