Question

6 Problem 5-11 Long-term contract; revenue recognition upon completion [LO5-9) In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $30,000000 The road was completed in 2020 Information related to the contract is as folows Billings during the year Cash cellections during the year 1,800,0003,690,84,600,0 SeferencesWestgate Construction uses the completed contract method of accounting for long-term construction contrects Required: 1. Calculate the amount of revenue and gross profit (oss) 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 ncurred 2-c. In the journal below, complete the necessary journal entries for the year 2020 (credit "Various accounts" for construction costs ncurred) 3. Complete the information required below to prepare a partial belance sheet for 2018 and 2019 showing any tems related to the 4. Calcuiate the amount of revenue and gross profit (oss) to be recognized in each of the three years assuming the following costs ncurred and costs to complete information Cost incurred during the year Estimated cests to complete as of year-end 5. Calculete the amount of revenue and gross profit 0oss) to be recognized in each of the three years assuming the following costs norred and costs to complese information くPrey 6of61. Next) 0

Answer 1

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Answer 1
Revenue Recognize = Cost incurred plus Gross Profit Less Gross Loss (if any)
Gross profit Recognize under completed contract method when Company completed contract.
Gross Profit from Contract = 10000000-2400000-3600000-2200000			1,800,000
Year	2018	2019	2020
Gross profit	0	0	1,800,000
Revenue	2,400,000	3,600,000	4,000,000
Answer 2
Date	General Journal	Debit	Credit
2018	Construction in progress	2,400,000
	Various accounts		2,400,000
	(To record cost incurred in Progress.)
2018	Accounts receivable	2,000,000
	Billings on construction contract		2,000,000
	(To record Billings to Customer.)
2018	Cash	1,800,000
	Accounts receivable		1,800,000
	(To record cash collected from the customer.)
2018	No Journal entry required.
2019	Construction in progress	3,600,000
	Various accounts		3,600,000
	(To record cost incurred in Progress.)
2019	Accounts receivable	4,000,000
	Billings on construction contract		4,000,000
	(To record Billings to Customer.)
2019	Cash	3,600,000
	Accounts receivable		3,600,000
	(To record cash collected from the customer.)
2019	No Journal entry required.
2020	Construction in progress	2,200,000
	Various accounts		2,200,000
	(To record cost incurred in Progress.)
2020	Accounts receivable	4,000,000
	Billings on construction contract		4,000,000
	(To record Billings to Customer.)
2020	Cash	4,600,000
	Accounts receivable		4,600,000
	(To record cash collected from the customer.)
2020	Construction in progress	1,800,000
	Cost of construction	8,200,000
	Revenue from long-term contracts		10,000,000
	(To record recognize Revenue.)
Answer 3
Partial balance sheet
	2018		2019
Current assets
Account receivable		200,000		600,000
Construction in progress	2,400,000		6,000,000
Less: Billings	2,000,000		6,000,000
Cost in excess of Billings		400,000		0
Current liability
Answer 4
Revenue Recognize = Cost incurred plus Gross Profit Less Gross Loss (if any)
Gross profit Recognize under the completed contract method when Company completed contract.
Gross Profit from Contract = 10000000-2400000-3800000-3200000			600,000
Year	2018	2019	2020
Gross profit	0	0	600,000
Revenue	2,400,000	3,800,000	3,800,000