In 2018, the Westgate Construction Company entered into a contract to construct
ID: 341584 • Letter: I
Question
In 2018, 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 2020. Information related to the contract is as follows: 2018 2019 2020 Cost incurred during the year $ 1,491,000 $ 3,195,000 $ 2,655,400 Estimated costs to complete as of year-end 5,609,000 2,414,000 0 Billings during the year 1,100,000 3,586,000 5,314,000 Cash collections during the year 900,000 2,700,000 6,400,000 Westgate Construction uses the completed contract method of accounting for long-term construction contracts. Required: 1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. 2-a. In the journal below, complete the necessary journal entries for the year 2018 (credit "Various accounts" for construction costs incurred). 2-b. In the journal below, complete the necessary journal entries for the year 2019 (credit "Various accounts" for construction costs incurred). 2-c. In the journal below, complete the necessary journal entries for the year 2020 (credit "Various accounts" for construction costs incurred). 3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 showing any items related to the contract. 4. 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. 2018 2019 2020 Cost incurred during the year $ 2,590,000 $ 3,895,000 $ 3,290,000 Estimated costs to complete as of year-end 5,790,000 3,290,000 0 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. 2018 2019 2020 Cost incurred during the year $ 2,590,000 $ 3,895,000 $ 4,185,000 Estimated costs to complete as of year-end 5,790,000 4,290,000 0
Explanation / Answer
Answer 1. Completed Contract Method 2018 2019 2020 Cost Incurred each year 1,491,000 3,195,000 2,655,400 Cost Incurred to date 1,491,000 4,686,000 7,341,400 Revenue - - 10,000,000 Expenses - - 7,341,400 Gross Profit - - 2,658,600 Answer 2. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 2018 1 Construction in Progress 1,491,000.00 Cash 1,491,000.00 2 Accounts Receivable 1,100,000.00 Billings on Contract 1,100,000.00 3 Cash 900,000.00 Accounts Receivable 900,000.00 2019 1 Construction in Progress 3,195,000.00 Cash 3,195,000.00 2 Accounts Receivable 3,856,000.00 Billings on Contract 3,856,000.00 3 Cash 2,700,000.00 Accounts Receivable 2,700,000.00 2020 1 Construction in Progress 2,655,400.00 Cash 2,655,400.00 2 Accounts Receivable 5,314,000.00 Billings on Contract 5,314,000.00 3 Cash 6,400,000.00 Accounts Receivable 6,400,000.00 4 Construction in Progress 2,658,600.00 Construction Expense 7,341,400.00 Construction Revenue 10,000,000.00 5 Billings on Contract 10,000,000.00 Construction in Progress 10,000,000.00 Answer 3. Balance Sheet (Partial) 2018 2019 Current Assets Accounts Receivables 200,000.00 1,356,000.00 Cost & Profits > Billings 391,000.00 Current Liabilities Billings > Cost & Profits - 270,000.00 Answer 4. Completed Contract Method 2018 2019 2020 Cost Incurred each year 2,590,000 3,895,000 3,290,000 Cost Incurred to date 2,590,000 6,485,000 9,775,000 Revenue - - 10,000,000 Expenses - - 9,775,000 Gross Profit - - 225,000 Answer 5. Completed Contract Method 2018 2019 2020 Cost Incurred each year 2,590,000 3,895,000 4,185,000 Cost Incurred to date 2,590,000 6,485,000 10,670,000 Revenue - - 10,000,000 Expenses - - 10,670,000 Gross Profit - - (670,000)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.