Furthermore: Req 2A-Journal entries for 2018. 1. record construction cost 2. rec

Question

Furthermore: Req 2A-Journal entries for 2018.

1. record construction cost

2. record progress billing

3. record cash collections

4. record gross profit (loss)

2B- Journal entries 2019

1. record construction cost

2. record progress billing

3. record cash collections

4. record gross profit (loss)

2C-Journal entries

1. record construction cost

2. record progress billing

3. record cash collections

4. record gross profit (loss)

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 Estimated costs to complete as of year-end Billings during the year Cash collections during the year $2,490,000 $3,984,000 $2,008,600 0 3,526,000 4,285,000 5,810,000 2,030,000 1,815,000 1,826,000 4,444,000 3,900,000 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 2020 Cost incurred during the year Estimated costs to complete as of year-end $2,490,000 $3,815,000 $3,215,000 5,810,000 3,115,000 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 2019 $2,490,000 $3,815,000 $3,945,000 4,130,000 2018 2020 Cost incurred during the year Estimated costs to complete as of year-end 5,810,000

Explanation / Answer

1 Percentage of completion=Cost incurred during the year/Total estimated cost Revenue to be recognized=Contract price*Percenatge of completion Gross profit/(loss) to be recognized=Estimated gross profit/(Loss) *percentage of completion Estimated gross profit/(loss)=Contract price-Total estimated costs 2018 2019 2020 a) Contract price 10000000 10000000 10000000 b) Actual cost to date 2490000 6474000 8482600 (2490000+3984000) (6474000+2008600) c) Estimated costs to complete 5810000 1826000 0 d) Total estimated costs (b)+© 8300000 8300000 8482600 e) Estimated gross profit/(loss) (a)-(d) 1700000 1700000 1517400 f) Percentage of completion (b)/(d) 30.00% 78.00% 100.00% g) Revenue to be recognized (a)*(f) 3000000 7800000 10000000 h) Gross profit/(loss) to be recognized €*(f) 510000 1326000 1517400 Journal entries: 2-a. Date Account Titles and Explanation Debit Credit 2018 Construction in progress 2490000 Various accounts 2490000 (Construction cost incurred) Accounts receivable 2030000 Billings on construction contract 2030000 (Billings during the year) Cash 1815000 Accounts receivable 1815000 (Cash collections during the year) Construction in progress 510000 Cost of construction 2490000 Revenue fronm long-term contracts 3000000 (Gross profit and revenue recognized) 2-b. Date Account Titles and Explanation Debit Credit 2019 Construction in progress 3984000 Various accounts 3984000 (Construction cost incurred) Accounts receivable 4444000 Billings on construction contract 4444000 (Billings during the year) Cash 3900000 Accounts receivable 3900000 (Cash collections during the year) Construction in progress 816000 Cost of construction 3984000 Revenue fronm long-term contracts 4800000 (Note:1) (Gross profit and revenue recognized) Note:1-Gross profit or revenue to be recognized Gross profit Revenue Total 1326000 7800000 Less: Recognized in 2018 510000 3000000 To be recognized in 2019 816000 4800000 2-c. Date Account Titles and Explanation Debit Credit 2020 Construction in progress 2008600 Various accounts 2008600 (Construction cost incurred) Accounts receivable 3526000 Billings on construction contract 3526000 (Billings during the year) Cash 4285000 Accounts receivable 4285000 (Cash collections during the year) Construction in progress 191400 Cost of construction 2008600 Revenue fronm long-term contracts 2200000 (Note:2) (Gross profit and revenue recognized) Note:2-Gross profit or revenue to be recognized Gross profit Revenue Total 1517400 10000000 Less: Recognized in 2018 510000 3000000 Less: recognized in 2019 816000 4800000 To be recognized in 2020 191400 2200000 3 Balance sheet (Partial) 2018 2019 Current assets: Accounts receivavble Beginning balance 0 215000 Add: billings 2030000 4444000 Less: cash collections -1815000 -3900000 Ending baalnce (a) 215000 759000 Construction in progress 3000000 7800000 (3984000+816000+3000000) Less: Billings on construction contract 2030000 6474000 (2030000+4444000) Costs and profits in excess of billings (b) 970000 1326000 Total current assets (a)+(b) 1185000 2085000 Current liabilities 0 0 4 2018 2019 2020 a) Contract price 10000000 10000000 10000000 b) Actual cost to date 2490000 6305000 9520000 (2490000+3815000) (6305000+3215000) c) Estimated costs to complete 5810000 3115000 0 d) Total estimated costs (b)+© 8300000 9420000 9520000 e) Estimated gross profit/(loss) (a)-(d) 1700000 580000 480000 f) Percentage of completion (b)/(d) 30.00% 66.93% 100.00% g) Revenue to be recognized (a)*(f) 3000000 6693205.94 10000000 h) Gross profit/(loss) to be recognized €*(f) 510000 388205.94 480000 5 2018 2019 2020 a) Contract price 10000000 10000000 10000000 b) Actual cost to date 2490000 6305000 10250000 (2490000+3815000) (6305000+3945000) c) Estimated costs to complete 5810000 4130000 0 d) Total estimated costs (b)+© 8300000 10435000 10250000 e) Estimated gross profit/(loss) (a)-(d) 1700000 -435000 -250000 f) Percentage of completion (b)/(d) 30.00% 60.42% 100.00% g) Revenue to be recognized (a)*(f) 3000000 6042165.79 10000000 h) Gross profit/(loss) to be recognized €*(f) 510000 -262834.21 -250000

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