In 2016, 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 2018. Information related to the contract is as follows:

2016	2017	2018
Cost incurred during the year	$	2,059,000	$	2,627,000	$	2,655,400
Estimated costs to complete as of year-end	5,041,000	2,414,000	0
Billings during the year	2,190,000	2,496,000	5,314,000
Cash collections during the year	1,895,000	2,400,000	5,705,000

Westgate recognizes revenue over time according to percentage of completion.

Required:

Calculate the amount of revenue and gross profit to be recognized in each of the three years

2.

Record construction costs for all 3 years

Record progress billings for all 3 years

Record cash collections for all 3 years

Record gross profit for all 3 years

3. Complete the information required below to prepare a partial balance sheet for 2016 and 2017 showing any items related to the contract. Indicate whether any of the amounts shown are contract assets or contract liabilities.

4.

Calculate the amount of revenue and 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 and roundyour final answers to the nearest whole dollar amount.Loss amounts should be indicated with a minus sign.)

2016

2017

2018

Cost incurred during the year

$

2,059,000

$

3,895,000

$

3,295,000

Estimated costs to complete as of year-end

5,041,000

3,195,000

0

5.

Calculate the amount of revenue and 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 and roundyour final answers to the nearest whole dollar amount.Loss amounts should be indicated with a minus sign.)

2016	2017	2018
Cost incurred during the year	$	2,059,000	$	3,895,000	$	4,185,000
Estimated costs to complete as of year-end	5,041,000	4,290,000	0

Your Name____________________________________ Aaron Smith and J. Edward Taylor ARE 106 Quantitative Methods Problem Set 2 Due in class on Monday, February 27, 2017 Be sure to write your name on this page. You can either enter your answers onto this Word document, expanding it to create the space you need, or else attach it to your answers on other sheets. Please answer each question completely, show your work, and attach your Shazam output. You must submit Problem Set 2 on time to receive credit. Answers will be posted promptly, so late problem sets cannot be accepted. Estimating a Production Function The data set \"maize.shz\" contains 86 observations on output, Q (in metric tons), land input T (in hectares), and labor input L (in person-days) for a random sample of maize farms in the Mexican state of Michoacn, during each of two years (1983 and 1989). These data were collected by your own Professor Taylor! The following table defines the variables in this data set: Variable Year Output (Q) Land (T) Labor (L) Description 1 if 1983, 2 if 1989 Output in Metric Tons Land Input in Hectares Labor Input in Person-Days 1. Estimate a 95-percent confidence interval for expected maize output (no econometrics yet!). Looking at your confidence interval, what would you say about the variability of maize output from this sample of farms? Is it high or low? 2. Let's use our econometric tools to estimate the output elasticity of land and labor. A friend suggests that you estimate a regression equation of the following form: Qi 1Ti 2 Li ui where ui is a stochastic error term assumed to be distributed independently and identically as ~N(0,2). Estimate this regression equation, using ordinary least squares in SHAZAM. Report your results in table form. J. Edward Taylor Winter 2017 3. What is your estimate of the elasticity of output with respect to land for this sample? The elasticity of output with respect to labor? Are they significantly different from zero at the 10% significance level? 4. Test the null hypothesis that the marginal products of land and labor are equal to each other, at the 10% significance level. 5. Now test whether your R-squared is significantly greater than zero, at the 10% significance level. 6. Critique the use of this functional form for the regression equation, in light of the producer theory you learned in your microeconomics course. 7. Now consider the following, alternative specification for your regression equation: Qi ATi 1 Li 2 e ui i. ii. iii. iv. What kind of production function does this regression equation correspond to? How can you modify this equation so that it can be estimated using ordinary least squares? Use the \"maize.shz\" data set to estimate this production function. Report your results in table form. Now what is your estimate of the output elasticity of land? The output elasticity of labor? Are they significantly different from zero at the 10% significance level? 8. Which of these two regression equations do you think is \"better?\" Explain. 9. Using the regression model in question 7, test the null hypothesis that there are constant returns to scale in maize production amongst the population of farmers from which this sample was drawn. 10. Consider whether the output elasticity of land and labor parameters different in 1983 than in 1989? i. Describe how can you modify your model to test for different elasticities in the two years ii. Use the \"maize.shz\" data set to estimate your model. Report your results in table form. iii. At the 10% significance level, test whether the elasticities are significantly different across years 2