Problem:
In 2011, 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 2013. Information related to the contract is as follows:
2011 2012 2013
Cost incurred during the year $ 2,400,000 $ 3,600,000 $ 2,150,000
Estimated costs to complete as of year-end 5,600,000 2,000,000 0
Billings during the year 2,000,000 4,000,000 4,000,000
Cash collections during the year 1,800,000 3,600,000 4,600,000
Westgate uses the percentage-of-completion method of accounting for long-term construction contracts.
1. Complete the information required below to prepare a partial balance sheet for 2011 and 2012 showing any items related to the contract. (Do not round intermediate calculations. Amounts to be deducted should be indicated with minus sign. Omit the "$" sign in your response.)
Balance sheet 2011 2012
Current assets:
Accounts receivable
Construction in progress
Less: Billings
Costs and profit in excess of billings
2. Calculate the amount of gross profit to be recognized in each of the three years, assuming the following costs incurred and costs to complete information. (Do not round intermediate calculations. Round your answers to the nearest dollar amount. Loss amounts should be indicated with a minus sign. Omit the "$" sign in your response.)
2011 2012 2013
Costs incurred during the year $ 2,400,000 $ 3,800,000 $ 3,150,000
Estimated costs to complete as of year-end 5,600,000 3,100,000 0
3. Calculate the amount of gross profit to be recognized in each of the three years, assuming the following costs incurred and costs to complete information. (Do not round intermediate calculations. Loss amounts should be indicated with a minus sign. Omit the "$" sign in your response.)
2011 2012 2013
Costs incurred during the year $ 2,400,000 $ 3,800,000 $ 3,850,000
Estimated costs to complete as of year-end 5,600,000 4,100,000 0