Question
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
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:
| 2021 | 2022 | 2023 | |||||||||
| Cost incurred during the year | $ | 3,219,000 | $ | 3,915,000 | $ | 1,722,600 | |||||
| Estimated costs to complete as of year-end | 5,481,000 | 1,566,000 | 0 | ||||||||
| Billings during the year | 2,700,000 | 4,434,000 | 2,866,000 | ||||||||
| Cash collections during the year | 2,500,000 | 4,300,000 | 3,200,000 | ||||||||
Assume that Westgate Constructions contract with Santa Clara County does not qualify for revenue recognition over time.
WHY IS CONSTRUCTION IN PROGRESS WRONG FOR BOTH 2021 & 2022 ??
| Balance Sheet (Partial) | 2021 | 2022 | ||
| Current assets: | ||||
| Accounts receivable | $200,000 selected answer correct | $334,000 selected answer correct | ||
| Construction in progress | $3,700,000 selected answer incorrect | $8,200,000 selected answer incorrect | ||
| Less: Billings | 2,700,000 selected answer correct | 7,134,000 selected answer correct | ||
| Costs in excess of billings | $1,000,000 | $1,066,000 | ||
| Current liabilities: | ||||
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Global Taxation How Modern Taxes Conquered The World
Authors: Philipp Genschel, Laura Seelkopf
1st Edition
0192897578, 978-0192897572
