In 2013, the Westgate Construction Company entered into a contract to construct
ID: 2499133 • Letter: I
Question
In 2013, 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 2015. Information related to the contract is as follows: 2013 2014 2015 Cost incurred during the year $ 1,400,000 $ 3,150,000 $ 2,695,000 Estimated costs to complete as of year-end 5,600,000 2,450,000 0 Billings during the year 1,000,000 3,550,000 5,450,000 Cash collections during the year 900,000 2,600,000 6,500,000 Westgate uses the percentage-of-completion method of accounting for long-term construction contracts. Required: 1. Calculate the amount of gross profit (loss) to be recognized in each of the three years. (Do not round intermediate calculations.) 2.1 In the journal below, complete the necessary journal entries for the year 2013 (credit various accounts for construction costs incurred). (If no entry is required for a particular transaction, select "No journal entry required" in the first account field. Do not round intermediate calculations.) 2.2 In the journal below, complete the necessary journal entries for the year 2014 (credit various accounts for construction costs incurred). (If no entry is required for a particular transaction, select "No journal entry required" in the first account field. Do not round intermediate calculations.) 2.3 In the journal below, complete the necessary journal entries for the year 2015 (credit various accounts for construction costs incurred). (If no entry is required for a particular transaction, select "No journal entry required" in the first account field. Do not round intermediate calculations.) 3. Complete the information required below to prepare a partial balance sheet for 2013 and 2014 showing any items related to the contract. (Do not round intermediate calculations.) 4. Calculate the amount of 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.) 2013 2014 2015 Costs incurred during the year $ 2,600,000 $ 3,900,000 $ 3,300,000 Estimated costs to complete as of year-end 5,800,000 3,300,000 0 5. Calculate the amount of 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.) 2013 2014 2015 Costs incurred during the year $ 2,600,000 $ 3,900,000 $ 4,200,000 Estimated costs to complete as of year-end 5,800,000 4,300,000 0
Explanation / Answer
Answer:1
Answer:2 Journal entry for 2013:
Record construction costs.
Dr WIP $ 1,400,000
Cr Cash/Accounts payable $ 1,400,000
Record progress billings.
Dr Accounts receivable 1,000,000
Cr Progress billings 1,000,000
Record cash collections.
Dr Cash 900,000
Cr AR 900,000
Record gross profit.
Dr Progress billings $2,000,000
Cr Revenue $2,000,000
Dr Cost of services $ 1,400,000
Cr WIP $ 1,400,000
Answer:3 Journal entry for 2014:
Record construction costs.
Dr WIP $ 3150,000
Cr Cash/Accounts payable $ 3150,000
Record progress billings.
Dr Accounts receivable 3550,000
Cr Progress billings 3550,000
Record cash collections.
Dr Cash 2600,000
Cr AR 2600,000
Record gross profit.
Dr Progress billings $4500,000
Cr Revenue $4500,000
Dr Cost of services $ 3150,000
Cr WIP $ 3150,000
Answer:4
Answer:5
Particulars 2013 2014 2015 Cost incurred during the year 1400000 4550000 7,245,000 + Estimated costs to complete as of year-end 5600000 2450000 0 Estimated total costs 7000000 7000000 7245000 % of completion 20 65 100 Revenue to be recognised 2000000 6500000 10000000 Less: Revenue already recognised 2000000 6500000 - Cost incurred 1400000 3,150,000 2,695,000 Gross profit 600000 1350000 805000Related Questions
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