Question

Requlred Informatlon The following information applies to the questions displayed below. 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: 2819 $2,284,8e $3,192,80 $2,424,488 2818 2828 Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year 5, 396, 8e 2,284,88e 2,148,88e 3,256,888 4,684,888 1,878,83 3,28, ,93,88e Westgate recognizes revenue over time according to percentage of completion 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)