In 2013, the Westgate Construction Company entered into a contract to construct

Question

In 2013, 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 2015. Information related to the contract is as follows: 2013 2014 2015 Cost incurred during the year $ 3,471,000 $ 4,005,000 $ 1,566,400 Estimated costs to complete as of year-end 5,429,000 1,424,000 0 Billings during the year 2,900,000 4,576,000 2,524,000 Cash collections during the year 2,610,000 4,500,000 2,890,000 ________________________________________ Westgate uses the percentage-of-completion method of accounting for long-term construction contracts. Required: 1. Calculate the amount of gross profit (loss) to be recognized in each of the three years. (Do not round intermediate calculations.) 2.1 In the journal below, complete the necessary journal entries for the year 2013 (credit various accountsfor construction costs incurred). (If no entry is required for a particular transaction, select "No journal entry required" in the first account field. Do not round intermediate calculations.) 2.2 In the journal below, complete the necessary journal entries for the year 2014 (credit various accountsfor construction costs incurred). (If no entry is required for a particular transaction, select "No journal entry required" in the first account field. Do not round intermediate calculations.) 2.3 In the journal below, complete the necessary journal entries for the year 2015 (credit various accountsfor construction costs incurred). (If no entry is required for a particular transaction, select "No journal entry required" in the first account field. Do not round intermediate calculations.) 3. Complete the information required below to prepare a partial balance sheet for 2013 and 2014 showing any items related to the contract. (Do not round intermediate calculations.) 4. Calculate the amount of gross profit (loss) to be recognized in each of the three years, assuming the following costs incurred and costs to complete information. (Do not round intermediate calculations.) 2013 2014 2015 Costs incurred during the year $ 2,490,000 $ 3,845,000 $ 3,290,000 Estimated costs to complete as of year-end 5,690,000 3,190,000 0 ________________________________________ 5. Calculate the amount of gross profit (loss) to be recognized in each of the three years, assuming the following costs incurred and costs to complete information. (Do not round intermediate calculations.) 2013 2014 2015 Costs incurred during the year $ 2,490,000 $ 3,845,000 $ 4,035,000 Estimated costs to complete as of year-end 5,690,000 4,190,000 0 ________________________________________

Explanation / Answer

YearGeneral JournalDebitCredit2014Construction in progress3,825,000Various accounts3,825,0002014Accounts receivable4,300,000Billings on construction contract4,300,0002014Cash4,100,000Accounts receivable4,100,0002014Construction in progress675,000Cost of construction3,825,000Revenue from long-term contracts4,500,000

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