In 2016, the Westgate Construction Company entered into a contract to construct
ID: 2483853 • Letter: I
Question
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
1.
Calculate the amount of revenue and gross profit to be recognized in each of the three years. (Do not round intermediate calculations. Loss amounts should be indicated with a minus sign.)
2-a.
In the journal below, complete the necessary journal entries for the year 2016 (credit "Various accounts" for construction costs incurred). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
2b.
In the journal below, complete the necessary journal entries for the year 2017 (credit "Various accounts" for construction costs incurred). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
2-c.
In the journal below, complete the necessary journal entries for the year 2018 (credit "Various accounts" for construction costs incurred). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
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. (Do not round intermediate calculations.)
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 round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)
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 round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)
Westgate recognizes revenue over time according to percentage of completion.Explanation / Answer
1)
Year 2016 Year 2017 year 2018 Total Contract price 10000000 10000000 10000000 Expense paid during the year 2523000 3177000 1980000 Total Expenses till date 2523000 5700000 (2523000+3177000) 7680000 (5700000+1980000) Add: Estimated costs at end of year 6177000 1800000 Estimation Given 0 Total Contract cost ( estimated) 8700000 7500000 7680000 Estimated Gross profit ( contract price - estimated cost) 1300000 2500000 2320000 % completion = cost incurred / estimated costs Year 2016 = 2523000 / 8700000 29.00% Year 2017 = 5700000 / 7500000 76.00% Year 2018 = 7680000 / 7680000 100% Gross profit for year = estimated Gross profit x completion stage - Gross profit recognised in previous year year 2016 = 1300000 x 29 % - 0 377000 year 2017 = 2500000 x 76 % - 377000 1523000 year 2018 = 2320000 x 100 % - 377000 - 1523000 420000 Revenue = cost incurred in year + gross profit for the year year 2016 = 2523000+377000 2900000 year 2017 = 3177000 + 1523000 4700000 year 2018 = 1980000 + 420000 2400000Related Questions
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