Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years assuming the following costs curred and costs to complete information. (Do not round intermediate calculations and round your final answers to the nearest hole dollar amount. Loss amounts should be indicated with a minus sign.) Costs incurred during the year Estimated costs to complete as of year-end evenue ross profit (loss) S $ 2021 2,800,000 $ 616,000 $ 2022 2021 $2,184,000 5,616,000 3,089,000 $ (771,000) $ 2023 2022 $3,860,000 4,220,000 4,111,000 31,000 2023 $4,080,000 0
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Year 2022 and year 2023 are incorrect and I don't understand how to get these numbers
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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)
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 amount. Loss amounts should be indicated with a minus sign.)
$
$
2021
2,800,000 $
616,000 $
2021
2022
$2,184,000 $3,510,000
5,616,000 2,106,000
2,120,000 3,574,000 4,306,000
1,860,000
3,400,000
4,740,000
2022
2021
2022
$2,184,000 $3,860,000
5,616,000 4,220,000
3,089,000 $
(771,000) $
2023
2023
$2,316,600
4,111,000
31,000
2023
$4,080,000
0
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Lets understand the basics.
In percentage of completion basis, revenue gets recorded based on the completion. Percentage of completion gets calculated based on the cost incurred and estimated cost to be incurred.
Percentage of completion = (Cost incurred/(Cost incurred + Estimated cost to be incurred)) * 100
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