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	$	2,542,000		$	3,772,000		$	2,074,600
Estimated costs to complete as of year-end		5,658,000			1,886,000			0
Billings during the year		2,020,000			4,294,000			3,686,000
Cash collections during the year		1,810,000			3,800,000			4,390,000

Westgate recognizes revenue over time according to percentage of completion.

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	$	2,542,000		$	3,810,000		$	3,210,000
Estimated costs to complete as of year-end		5,658,000			3,110,000			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	$	2,542,000		$	3,810,000		$	3,930,000
Estimated costs to complete as of year-end		5,658,000			4,120,000			0

Answer 1

Solved first Four Sub parts as per HOMEWORKLIB POLICY. Please post remaining separately.

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you Contract % Completion Part 1: Amount of Gross profit recognized each year Year 2018 $ 2,542,000 S 5,658,000 $8,200,000 Cost incurred during the year Add: Estimated cost to complete as of year end Estimated Total cost % Completion 31% Revenue to be recognized Less: Cost incurred Gross 10m*31% $ 3,100,000 S2,542,000 $558,000 Profit to be recognized Year 2019 6,314,000 $ 1,886,000 8,200,000 Cost incurred during the year Add: Estimated cost to complete as of year end Estimated Total cost % Completion A/B $7,700,000 $ 3,100,000 4,600,000 $3,772,000 $828,000 Revenue to be recognized Already recognized till 2018 To be recognized in 2019 Less: Cost incurred Gross Profit to be recognized 10m*77% Year 2020 Cost incurred during the year Add: Estimated cost to complete as of year end Estimated Total cost $ 8,388,600 $8,388,600 % Completion 100.00% $ 10,000,000 7,700,000 $2,300,000 $ 2,074,600 $225,400 Revenue to be recognized Already recognized till 2019 To be recognized in 2020 Less: Cost incurred Gross Profit to be recognized 10m*100%

Part 2a: 2018 Journal entries: Debit S No Account Credit $2,542,000 Construction in Progress Various Accounts (record construction cost) Accounts Receivable Billing on construction contracts (record progress billing) Cash Accounts Receivable (record collection) Construction in Progress Cost of Construction Revenue from long term contracts (record gross profit) $ 2,542,000 S2,020,000 $ 2,020,000 S 1,810,000 $1,810,000 $558,000 $2,542,000 4 Cost 3,100,000 Revenue recognized Part 2b: 2019 Journal entries: S No Debit Account Credit $3,772,000 Construction in Progress Various Accounts (record construction cost) Accounts Receivable Billing on construction contracts (record progress billing) Cash Accounts Receivable (record collection) Construction in Progress Cost of Construction Revenue from long term contracts (record gross profit) $3,772,000 $4,294,000 $ 4,294,000 $3,800,000 $3,800,000 828,000 $3,772,000 Cost $ 4,600,000 Revenue recognized Part 2c: 2020 Journal entries: S No Debit Credit Account $2,074,600 Construction in Progress Various Accounts (record construction cost) Accounts Receivable Billing on construction contracts (record progress billing) Cash Accounts Receivable (record collection) Construction in Progress Cost of Construction Revenue from long term contracts (record gross profit) 2,074,600 $ 3,686,000 $ 3,686,000 4,390,000 4,390,000 225,400 $ 2,074,600 Cost $ 2,300,000 Revenue recognized

Part 3 2018 2019 Current Assets.: Accounts Receivable Construction in Progress Less Billings Costs and profit in excess of billing Current Liabilities: Various Accounts/Accounts Payable $210,000 $ 704,000 $ 3,100,000 $ 2,020,000 7,700,000 6,314,000 S 1,080,000 S 1,386,000 2,542,000 $ 6,314,000 Part 4 Year 2018 2,542,000 S 5,658,000 $8,200,000 Cost incurred during the year Add: Estimated cost to complete as of year end Estimated Total cost % Completion 2079000/7700000 31% Revenue to be recognized Less: Cost incurred Gross Profit to be recognized $3,100,000 2,542,000 558,000 10m*31% Year 2019 Cost incurred during the year Add: Estimated cost to complete as of year end Estimated Total cost $ 6,352,000 3,110,000 $ 9,462,000 % Completion 67.13% 10m*67.13% $ 6,713,168 $ 3,100,000 $3,613,168 $3,810,000 196,832 Revenue to be recognize Already recognized til 2018 To be recognized in 2019 Less: Cost incurred Gross Profit/Loss to be recognized Year 2020 $9,562,000 Cost incurred during the year Add: Estimated cost to complete as of year end Estimated Total cost $ 9,562,000 % Completion 100.00% $ 10,000,000 $6,713,168 3,286,832 $3,210,000 76,832 Revenue to be recognized Already recognized till 2019 To be recognized in 2020 Less: Cost incurred Gross Profit to be recognized 10m * 100%