Intermediate Accounting, 10 Ed
10th Edition
ISBN: 9781260310177
Author: Mark W. Nelson, Wayne B. Thomas J. David Spiceland
Publisher: McGraw-Hill Education
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Chapter 6, Problem 6.35BE
Long-term contract; revenue recognition upon completion
• LO5–9
Refer to the situation described in BE 5–31. Assume that the building was completed during the second year, and construction costs incurred during the second year were $10 million. How much revenue and gross profit or loss will the company recognize in the first and second year if it recognizes revenue upon contract completion?
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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
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…
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 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…
Exercise 6-24 (Algo) Long-term contract; revenue recognition over time; solve for unknowns [LO6-9]
In 2021, Long Construction Corporation began construction work under a three-year contract. The contract price is $2,200,000. Long
recognizes revenue over time according to percentage of completion for financial reporting purposes. The financial statement
presentation relating to this contract at December 31, 2021, is as follows:
Balance Sheet
Accounts receivable (from construction progress billings)
Construction in progress.
Less: Billings on construction contract
Cost and profit of uncompleted contracts in excess of billings
Income Statement
Income (before tax) on the contract recognized in 2021
Required:
1. What was the cost of construction actually incurred in 2021?
$ 160,000
(152,000)
1. Actual costs incurred in 2021
2. Cash collections in 2021
3. Estimated cost to complete
4. Estimated percentage
$26,000
$36,000
8,000
2. How much cash was collected in 2021 on this contract?
3. What…
Chapter 6 Solutions
Intermediate Accounting, 10 Ed
Ch. 6 - What are the five key steps a company follows to...Ch. 6 - What indicators suggest that a performance...Ch. 6 - What criteria determine whether a company can...Ch. 6 - We recognize service revenue either at one point...Ch. 6 - What characteristics make a good or service a...Ch. 6 - Prob. 6.6QCh. 6 - What must a contract include for the contract to...Ch. 6 - How might the definition of probable affect...Ch. 6 - When a contract includes an option to buy...Ch. 6 - Prob. 6.10Q
Ch. 6 - Prob. 6.11QCh. 6 - Is a customers right to return merchandise a...Ch. 6 - Prob. 6.13QCh. 6 - Under what circumstances should sellers consider...Ch. 6 - When should a seller view a payment to its...Ch. 6 - What are three methods for estimating stand-alone...Ch. 6 - When is revenue recognized with respect to...Ch. 6 - In a franchise arrangement, what are a franchisors...Ch. 6 - When does a company typically recognize revenue...Ch. 6 - Prob. 6.20QCh. 6 - Prob. 6.21QCh. 6 - Prob. 6.22QCh. 6 - Must bad debt expense be reported on its own line...Ch. 6 - Explain the difference between contract assets,...Ch. 6 - Explain how to account for revenue on a long-term...Ch. 6 - Prob. 6.26QCh. 6 - Prob. 6.27QCh. 6 - Timing of revenue recognition LO53 Estate...Ch. 6 - Allocating the transaction price LO54 Sarjit...Ch. 6 - Existence of a contract LO5-5 Tulane Tires wrote...Ch. 6 - Prob. 6.6BECh. 6 - Prob. 6.7BECh. 6 - Performance obligations; warranties LO55 Vroom...Ch. 6 - Prob. 6.9BECh. 6 - Prob. 6.10BECh. 6 - Variable consideration LO56 Leo Consulting enters...Ch. 6 - Prob. 6.16BECh. 6 - Prob. 6.17BECh. 6 - Prob. 6.18BECh. 6 - Prob. 6.19BECh. 6 - Prob. 6.20BECh. 6 - Prob. 6.21BECh. 6 - Estimating stand-alone selling prices: expected...Ch. 6 - Estimating stand-alone selling prices; residual...Ch. 6 - Prob. 6.24BECh. 6 - Prob. 6.25BECh. 6 - Contract assets and contract liabilities LO58...Ch. 6 - Long-term contract; revenue recognition over time;...Ch. 6 - Prob. 6.34BECh. 6 - Long-term contract; revenue recognition upon...Ch. 6 - Long-term contract; revenue recognition; loss on...Ch. 6 - Prob. 6.1ECh. 6 - Allocating transaction price LO54 Video Planet...Ch. 6 - Prob. 6.4ECh. 6 - Prob. 6.6ECh. 6 - Prob. 6.7ECh. 6 - Prob. 6.9ECh. 6 - Variable considerationmost likely amount; change...Ch. 6 - Variable considerationexpected value; change in...Ch. 6 - Prob. 6.12ECh. 6 - Prob. 6.13ECh. 6 - Prob. 6.14ECh. 6 - Approaches for estimating stand-alone selling...Ch. 6 - FASB codification research LO56, LO57 Access the...Ch. 6 - FASB codification research LO58 Access the FASB...Ch. 6 - Long-term contract; revenue recognition over time;...Ch. 6 - Prob. 6.1PCh. 6 - Prob. 6.2PCh. 6 - Prob. 6.3PCh. 6 - Prob. 6.5PCh. 6 - Variable consideration; change of estimate LO53,...Ch. 6 - Prob. 6.7PCh. 6 - Prob. 6.8PCh. 6 - Prob. 6.10PCh. 6 - Long-term contract; revenue recognition over time...Ch. 6 - Prob. 6.1DMPCh. 6 - Judgment Case 52 Satisfaction of performance...Ch. 6 - Judgment Case 53 Satisfaction of performance...Ch. 6 - Prob. 6.5DMPCh. 6 - Prob. 6.7DMPCh. 6 - Prob. 6.9DMPCh. 6 - Prob. 6.10DMPCh. 6 - Prob. 6.12DMPCh. 6 - Prob. 6.13DMPCh. 6 - Prob. 6.14DMPCh. 6 - Prob. 6.15DMPCh. 6 - Prob. 1CCTC
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- 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 Problem 6-10 (Algo) Part 5 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 $ 2,610,000 6,390,000 2,100,000 1,850,000 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. X Answer is complete but not entirely correct. 2026 3,939,962 (110,038)…arrow_forwardExercise 6-20 (Algo) Long-term contract; revenue recognition over time vs. upon project completion [LO6-9] On June 15, 2024, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $320 million. The expected completion date is April 1, 2026, just in time for the 2026 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions): Costs incurred during the year Estimated costs to complete as of December 31 Required: Required 1 Required 2 Required 3 2024 2025 2026 Construction revenue Construction expense Gross profit (loss) 1. Compute the revenue and gross profit that Sanderson will report in its 2024, 2025, and 2026 income statements related to this contract, assuming Sanderson recognizes revenue over time according to percentage of completion. 2. Compute the revenue and gross profit that Sanderson will report in its 2024, 2025, and 2026 income…arrow_forwardExercise 6-20 (Algo) Long-term contract; revenue recognition over time vs. upon project completion [LO6-9] On June 15, 2024, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $230 million. The expected completion date is April 1, 2026, just in time for the 2026 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions): Costs incurred during the year Estimated costs to complete as of December 31 Required: Required 1 Required 2 Required 3 Year 1. Compute the revenue and gross profit that Sanderson will report in its 2024, 2025, and 2026 income statements related to this contract, assuming Sanderson recognizes revenue over time according to percentage of completion. 2. Compute the revenue and gross profit that Sanderson will report in its 2024, 2025, and 2026 income statements related to this contract, assuming this project does not qualify…arrow_forward
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- of 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_forwardProblem 6-11 (Algo) Long-term contract; revenue recognition upon completion [LO6-9] 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 Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year Assume that Westgate Construction's contract with Santa Clara County does not qualify for revenue recognition over time. Cost incurred during the year Estimated costs to complete as of year- end Required: 1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. 2-a. In the journal below, complete the necessary journal entries for the year 2024 (credit "Cash, Materials, etc." for construction costs incurred). 2-b. In the journal below, complete the…arrow_forwardProblem 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: Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year Cost incurred during the year Estimated costs to complete as of year-end 2021 $1,584,000 5,616,000 1,200,000 1,000,000 Cost incurred during the year Estimated costs to complete as of year-end Assume that Westgate Construction's contract with Santa Clara County does not qualify for revenue recognition over time. Required: 1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. 2-a. In the journal below, complete the necessary journal entries for the year 2021 (credit "Various accounts" for construction costs incurred).…arrow_forward
- 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: Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year. 2021 $1,584,000 5,616,000 1,200,000 1,000,000 Cost incurred during the year Estimated costs to complete as of year-end) 2022 $3,240,000 2,376,000 3,624,000 2,800,000 Assume that Westgate Construction's contract with Santa Clara County does not qualify for revenue recognition over time. Required: 1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. 2-a. In the journal below, complete the necessary journal entries for the year 2021 (credit "Various accounts" for construction costs incurred). Cost incurred during the…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: Accounts receivable Construction in progress Less: Billings Costs and profit in excess of billings Current liabilities: Construction in progress 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.) X Answer is…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. 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. (Do not round intermediate calculations and round your final answers to the nearest whole dollar…arrow_forward
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