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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	$	2,204,000		$	3,192,000		$	2,424,400
Estimated costs to complete as of year-end		5,396,000			2,204,000			0
Billings during the year		2,140,000			3,256,000			4,604,000
Cash collections during the year		1,870,000			3,200,000			4,930,000

Westgate recognizes revenue over time according to percentage of completion.

rev: 09_15_2017_QC_CS-99734

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).

Answer 1

Solution 2a:

Computation of % of completion, revenue recognition and Gross Profit - Westgate Construction Company
Year	Actual cost incurred (A)	Total cost incurred till date (B)	Total estimated Cost ( C )	% of completion (D) (B/C)	Contract Price (E)	Total Revenue to be recoganized (F) (E * D)	Revenue for current period (G)	Gross Profit (H) (G-A)
2018	$2,204,000	$2,204,000	$7,600,000	29.00%	$10,000,000	$2,900,000	$2,900,000	$696,000
2019	$3,192,000	$5,396,000	$7,600,000	71.00%	$10,000,000	$7,100,000	$4,200,000	$1,008,000
2020	$2,424,400	$7,820,400	$7,820,400	100.00%	$10,000,000	$10,000,000	$2,900,000	$475,600

Journal Entries - Westgate Construction Company - 2018
Event	Particulars	Debit	Credit
1	Construction in Progress Dr	$2,204,000.00
	To Various Accounts		$2,204,000.00
	(To record construction cost incurred)
2	Accounts receivables Dr	$2,140,000.00
	To Billings on construction contract		$2,140,000.00
	(To record progress billings)
3	Cash Dr	$1,870,000.00
	To Accounts receivables		$1,870,000.00
	(To record collection from customer)
4	Construction in Progress Dr	$696,000.00
	Cost of construction Dr	$2,204,000.00
	To Revenue from long term contracts		$2,900,000.00
	(To record revenue and gross profit)

Solution 2b:

Journal Entries - Westgate Construction Company - 2019
Event	Particulars	Debit	Credit
1	Construction in Progress Dr	$3,192,000.00
	To Various Accounts		$3,192,000.00
	(To record construction cost incurred)
2	Accounts receivables Dr	$3,256,000.00
	To Billings on construction contract		$3,256,000.00
	(To record progress billings)
3	Cash Dr	$3,200,000.00
	To Accounts receivables		$3,200,000.00
	(To record collection from customer)
4	Construction in Progress Dr	$1,008,000.00
	Cost of construction Dr	$3,192,000.00
	To Revenue from long term contracts		$4,200,000.00
	(To record revenue and gross profit)

Solution 2c:

Journal Entries - Westgate Construction Company - 2020
Event	Particulars	Debit	Credit
1	Construction in Progress Dr	$2,424,400.00
	To Various Accounts		$2,424,400.00
	(To record construction cost incurred)
2	Accounts receivables Dr	$4,604,000.00
	To Billings on construction contract		$4,604,000.00
	(To record progress billings)
3	Cash Dr	$4,930,000.00
	To Accounts receivables		$4,930,000.00
	(To record collection from customer)
4	Construction in Progress Dr	$475,600.00
	Cost of construction Dr	$2,424,400.00
	To Revenue from long term contracts		$2,900,000.00
	(To record revenue and gross profit)