Question

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: 

2823 $2,475,000 Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year 2021 $1,875, eee 5.625.000 1,5ee,eee 1,3ee,eee 2022 $3,375,000 2.25e,eee 3,75e,eee 3,100,eee 4,750,000 5,600,000 

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 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 2823 Cost incurred during the year $2,550,000 $3,875,000 $3,250,000 Estimated costs to complete as of a year and 5,75e.ee 3.250.000

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 2821 

$2,550,000 5,750,000 2022 $3,875, eee 4,25e,eee 2823 $4,125, eee

Answer 1

Answer 1

Answer 1
Year	2021	2022	2023
Cost incurred during the year	$          1,875,000	$          3,375,000	$          2,475,000
Cumulative cost incurred at end of year	$          1,875,000	$          5,250,000	$          7,725,000
Cumulative cost incurred at end of year	$          1,875,000	$          5,250,000	$          7,725,000
Add: Estimated costs to complete as of year-end	$          5,625,000	$          2,250,000	$                           0
Total estimated cost	$          7,500,000	$          7,500,000	$          7,725,000
Percentage of completion (cumulative cost incurred at end of year / Total estimated cost)	25.00%	70.00%	100.00%
Revenue recognized till the date (10000000 * percentage of completion)	$          2,500,000	$          7,000,000	$        10,000,000
Less: Revenue recognized up to earlier year	$                           0	$          2,500,000	$          7,000,000
Revenue recognized in current year	$          2,500,000	$          4,500,000	$          3,000,000
Revenue recognized in current year	$          2,500,000	$          4,500,000	$          3,000,000
Less: cost incurred during the year	$          1,875,000	$          3,375,000	$          2,475,000
Gross Profit (Loss)	$              625,000	$          1,125,000	$              525,000
Your Answer
Year	2021	2022	2023
Revenue	$          2,500,000	$          4,500,000	$          3,000,000
Gross Profit (Loss)	$              625,000	$          1,125,000	$              525,000

Answer 2 and 3

? X 2019 10 01.xlsx - Microsoft Excel Sign in INSERT VIEW DEVELOPER FILE HOME PAGE LAYOUT FORMULAS DATA REVIEW L22 F G K M Q 1 2 Debit General Journal Credit Date Construction in progress 1,875,000 2021 5 Various Accounts 1,875,000 (To record cost incurred in Progress.) 6 7 8 2021 Accounts receivable 1,500,000 Billings on construction contract 1,500,000 To record Billings to Customer.) 10 11 Cash 12 2021 1,300,000 Accounts receivable 1,300,000 13 (To record cash collected from customer.) 14 15 Construction in progress 16 2021 625,000 Cost of construction 17 1,875,000 Construction Revenue 2,500,000 18 (To record recognize Revenue.) 19 20 Construction in progress 21 2022 3,375,000 22 Various Accounts 3,375,000 (To record cost incurred in Progress.) 23 24 2022 Accounts receivable 25 3,750,000 Billings on construction contract 3,750,000 26 (To record Billings to Customer.) 27 Activate Windows Go to Settings to-activate Windews 28. Sheet133 Sheet134 Sheet135 Sheet136 Sheet137 Sheet138 Sheet139 Sheet140 READY 100% 02:44 ENG Search the web and Windows 31-10-19 IN

? X 2019 10 01.xlsx - Microsoft Excel Sign in INSERT VIEW DEVELOPER FILE НОМE PAGE LAYOUT FORMULAS DATA REVIEW fix L24 X FA L F G Н J К М Q 24 25 2022 Accounts receivable 3,750,000 Billings on construction contract 3,750,000 26 (To record Billings to Customer.) 27 28 Cash 29 2022 3,100,000 Accounts receivable 30 3,100,000 (To record cash collected from customer.) 31 32 Construction in progress 33 2022 1,125,000 Cost of construction 34 3,375,000 Construction Revenue 35 4,500,000 (To record recognize Revenue.) 36 37 Construction in progress 2023 38 2,475,000 2,475,000 39 Various Accounts (To record cost incurred in Progress.) 40 41 42 2023 Accounts receivable 4,750,000 Billings on construction contract 43 4,750,000 (To record Billings to Customer.) 44 45 Cash 2023 5,600,000 46 Accounts receivable 47 5,600,000 (To record cash collected from customer.) 48 49 Construction in progress 50 2023 525,000 Activate Windows Go to Settings to-activate Windews Cost of construction 51 2.475.000 Sheet134 Sheet135 Sheet133 Sheet136 Sheet137 Sheet138 Sheet139 Sheet140 READY 100% 02:44 ENG Search the web and Windows 31-10-19 IN

? X 2019 10 01.xlsx - Microsoft Excel Sign in INSERT VIEW DEVELOPER FILE HOME PAGE LAYOUT FORMULAS DATA REVIEW fox N44 FA N F G Н K L Q 44 (To record Billings to Customer.) 45 2023 Cash 46 5,600,000 47 Accounts receivable 5,600,000 (To record cash collected from customer.) 48 49 Construction in progress 50 2023 525,000 Cost of construction 51 2,475,000 52 Construction Revenue 3,000,000 (To record recognize Revenue.) 53 54 Billings on construction contract 55 2023 10,000,000 56 Construction in progress 10,000,000 To record completion of contract.) 57 58 Partial Balance sheet 59 2021 2022 Current assets 60 Accounts receivable 61 200,000 850,000 $ 2,500,000 $ 7,000,000 Construction in progress 62 Less: Billings Cost in excess of Billings 1,500,000 63 5,250,000 1,000,000 1,750,000 64 65 66 Calculation 2022 2021 200,000 67 Beginning Accounts receivable Billings 1,500,000 3,750,000 68 Less: Collections 3,100,000 69 1,300,000 Accounts receivable 70 200,000 850,000 Activate Windows Go to Settings to-activate Windews 71 Sheet136 Sheet133 Sheet134 Sheet135 Sheet137 Sheet138 Sheet139 Sheet140 100% READY 02:45 ENG Search the web and Windows 31-10-19 IN

Answer 4

Answer 4
Year	2021	2022	2023
Cost incurred during the year	$          2,550,000	$          3,875,000	$          3,250,000
Cumulative cost incurred at end of year	$          2,550,000	$          6,425,000	$          9,675,000
Cumulative cost incurred at end of year	$          2,550,000	$          6,425,000	$          9,675,000
Add: Estimated costs to complete as of year-end	$          5,750,000	$          3,250,000	$                           0
Total estimated cost	$          8,300,000	$          9,675,000	$          9,675,000
Percentage of completion (cumulative cost incurred at end of year / Total estimated cost)	30.72289%	66.40827%	100.00000%
Revenue recognized till the date (10000000 * percentage of completion)	$          3,072,289	$          6,640,827	$        10,000,000
Less: Revenue recognized up to earlier year	$                           0	$          3,072,289	$          6,640,827
Revenue recognized in current year	$          3,072,289	$          3,568,538	$          3,359,173
Revenue recognized in current year	$          3,072,289	$          3,568,538	$          3,359,173
Less: cost incurred during the year	$          2,550,000	$          3,875,000	$          3,250,000
Gross Profit (Loss)	$              522,289	$           (306,462)	$              109,173
Your Answer
Year	2021	2022	2023
Revenue	$          3,072,289	$          3,568,538	$          3,359,173
Gross Profit (Loss)	$              522,289	$           (306,462)	$              109,173

Answer 5

Answer 5
Year	2021	2022	2023
Cost incurred during the year	$          2,550,000	$          3,875,000	$          4,125,000
Cumulative cost incurred at end of year	$          2,550,000	$          6,425,000	$        10,550,000
Cumulative cost incurred at end of year	$          2,550,000	$          6,425,000	$        10,550,000
Add: Estimated costs to complete as of year-end	$          5,750,000	$          4,250,000	$                           0
Total estimated cost	$          8,300,000	$        10,675,000	$        10,550,000
Percentage of completion (cumulative cost incurred at end of year / Total estimated cost)	30.72289%	60.18735%	100.00000%
Revenue recognized till the date (10000000 * percentage of completion)	$          3,072,289	$          6,018,735	$        10,000,000
Less: Revenue recognized up to earlier year	$                           0	$          3,072,289	$          6,018,735
Revenue recognized in current year	$          3,072,289	$          2,946,446	$          3,981,265
Revenue recognized in current year	$          3,072,289	$          2,946,446	$          3,981,265
Less: cost incurred during the year	$          2,550,000	$          3,875,000	$          4,125,000
Less: Provision For Loss of Project		$              675,000
Add: Loss settled from Provision			$              675,000
Gross Profit (Loss)	$              522,289	$        (1,603,554)	$              531,265
Your Answer
Year	2021	2022	2023
Revenue	$          3,072,289	$          2,946,446	$          3,981,265
Gross Profit (Loss)	$              522,289	$        (1,603,554)	$              531,265
Hint:
Provision For Loss of Project, When Estimated Project cost is more than Contract Price then Difference between them Provision should be made. And for future Amount of provision should be used for write of loss. For 2022, Provision = estimated cost less Contract revenue = 10,675,000 - 10,000,000 = 675,000