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I am reposting this question from November 8, 2019. Can someone please assist with this problem?

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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: 2023 $2,371,600 Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year 2021 $ 2,079,000 5,621,000 1,700,000 1,500,000 2022 $ 3,465,000 2,156,000 3,844,000 3,300,000 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 e 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 $2,530,000 $3,865,000 $3,230,000 Estimated costs to complete as of year-end 5,730,000 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. Cost incurred during the year Estimated costs to complete as of year-end 2021 $2,530,000 5,730,000 2022 $3,865,000 4,230,000 2023 $4,095,000

Answer 1

As Santa Clara County does not qualify for recognition of revenue over the time, Completed Contract method is followed. In which total revenue is recognized after the completion of contract.

2022 2023 Revenue to be recongnised Less: Cost incurred Gross Profit (Loss) 2021 0 2079000 3465000 10000000 2371600 2084400 0 Transaction Date General Journal Debit Credit Cost Incurred 2079000 2021 Work in Progress Cash 2079000 Bills issued 1700000 2021 Account receivables Billings 1700000 Payment Received 1500000 2021 Cash Account receivables 1500000

Cost Incurred 3465000 2022 Work in Progress Cash 3465000 Bills issued 3844000 2022 Account receivables Billings 3844000 Payment Received 3300000 2022 Cash Account receivables 3300000 Cost Incurred 2371600 2023 Work in Progress Cash 2371600 Bills issued 4456000 2023 Account receivables Billings 4456000 Payment Received 5200000 2023 Cash Account receivables 5200000 7915600 2023 Construction Expenses Work in Progress 7915600 10000000 2023 Billings Revenue recognised 10000000

For your reference, answer in case of % completion method (i.e., recognition of revenue over the time) is as follows

Contract Price Cost incurred during the year Estimated cost to complete contract 2021 10000000 2079000 5621000 2022 10000000 3465000 2156000 2023 10000000 2371600 Total Expected Cost 7700000 7700000 7915600 % completion 27 72 100 Billings 1700000 3844000 4456000 Cash collected 1500000 3300000 5200000 2021 2700000 Revenue based on % completion of contract Revenue recongnised in the previous years 2022 7200000 2700000 2023 10000000 (a*e) 7200000 Revenue to be recongnised Less: Cost incurred Gross Profit (Loss) 2700000 2079000 621000 4500000 3465000 1035000 2800000 2371600 428400

Transaction Date General Journal Debit Credit Cost Incurred 2079000 2021 Work in Progress Cash 2079000 Bills issued 1700000 2021 Account receivables Billings 1700000 Payment Received 1500000 2021 Cash Account receivables 1500000 2021 Construction Expenses Work in Progress ( Balanacing Figure ) Revenue recognised 2079000 621000 2700000 Cost Incurred 3465000 2022 Work in Progress Cash 3465000 Bills issued 3844000 2022 Account receivables Billings 3844000 Payment Received 3300000 2022 Cash Account receivables 3300000 2022 Construction Expenses Work in Progress ( Balanacing Figure) Revenue recognised 3465000 1035000 4500000

Cost Incurred 2371600 2023 Work in Progress Cash 2371600 Bills issued 4456000 2023 Account receivables Billings 4456000 Payment Received 5200000 2023 Cash Account receivables 5200000 2023 Construction Expenses Work in Progress Balanacing Figure ) Revenue recognised 2371600 428400 2800000 10000000 2023 Billings Work in progress 10000000