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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 $ 2,079,000 Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year $3,465,000 2,371,600 5,621,000 1,700,000 1,s00,000 2,156,000 3,844,000 3,300,000 0 4,456,000 5,200,000 Assume that Westgate Construction's contract with Santa Clara County does not qualify for revenue recognition over time 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 2021 (credit "Various accounts" for construction costs incurred). 2-b. In the journal below, complete the necessary journal entries for the year 2022 (credit "Various accounts" for construction costs incurred). 2-c. In the journal below, complete the necessary journal entries for the year 2023 (credit "Various accounts" for construction costs incurred). 3. Complete the information required below to prepare a partial balance sheet for 2021 and 2022 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 2021 2022 2023 Cost incurred during the year Estimated costs to complete as of year-end $2,530,000 5,730,000 $3,865,000 $3,230,000 3,230,000 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. 2021 2022 2023 Cost incurred during the year Estimated costs to complete as of year-end $2,530,000 5,730,000 $3,865,000 4,230,000 $4,095,000

Answer 1

1	Percentage of completion=Cost incurred during the year/Total estimated cost
	Revenue to be recognized=Contract price*Percentage of completion
	Gross profit/(loss) to be recognized=Estimated gross profit/(Loss) *percentage of completion
	Estimated gross profit/(loss)=Contract price-Total estimated costs
				2021	2022	2023
	a) Contract price			10000000	10000000	10000000
	b) Actual cost to date			2079000	5544000	7915600
					(2079000+3465000)	(5544000+2371600)
	c) Estimated costs to complete			5621000	2156000	0
	d) Total estimated costs (b)+©			7700000	7700000	7915600
	e) Estimated gross profit/(loss) (a)-(d)			2300000	2300000	2084400
	f) Percentage of completion (b)/(d)			27.00%	72.00%	100.00%
	g) Revenue to be recognized (a)*(f)			2700000	7200000	10000000
	Less: Revenue already recognized			0	2700000	7200000
						(2700000+4500000)
	Revenue to be recognized in the current year			2700000	4500000	2800000
	h) Gross profit/(loss) to be recognized €*(f)			621000	1656000	2084400
	Less:Gross profit/(loss) already recognized			0	621000	1656000
						(621000+1035000)
	Gross profit/(loss) to be recognized in the current year			621000	1035000	428400
	Journal entries:
2-a.	Date	Account Titles and Explanation			Debit	Credit
	2021	Construction in progress			2079000
		Various accounts				2079000
		(Construction cost incurred)
		Accounts receivable			1700000
		Billings on construction contract				1700000
		(Billings during the year)
		Cash			1500000
		Accounts receivable				1500000
		(Cash collections during the year)
		Construction in progress			621000
		Cost of construction			2079000
		Revenue from long-term contracts				2700000
		(Gross profit and revenue recognized)
2-b.	Date	Account Titles and Explanation			Debit	Credit
	2022	Construction in progress			3465000
		Various accounts				3465000
		(Construction cost incurred)
		Accounts receivable			3844000
		Billings on construction contract				3844000
		(Billings during the year)
		Cash			3300000
		Accounts receivable				3300000
		(Cash collections during the year)
		Construction in progress			1035000
		Cost of construction			3465000
		Revenue from long-term contracts				4500000
		(Note:1)
		(Gross profit and revenue recognized)
2-c.	Date	Account Titles and Explanation			Debit	Credit
	2023	Construction in progress			2371600
		Various accounts				2371600
		(Construction cost incurred)
		Accounts receivable			4456000
		Billings on construction contract				4456000
		(Billings during the year)
		Cash			520000
		Accounts receivable				520000
		(Cash collections during the year)
		Construction in progress			428400
		Cost of construction			2371600
		Revenue from long-term contracts				2800000
		(Note:2)
		(Gross profit and revenue recognized)