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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:

Westgate recognizes revenue over time according to percentage of completion.

rev: 09_15_2017_QC_CS-99734

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).

2018 2019 2020 Cost incurred during the year $ 2,204,000 $ 3,192,000 $ 2,424,400 Estimated costs to complete as of year-end 5,396,000 2,204,000 0 Billings during the year 2,140,000 3,256,000 4,604,000 Cash collections during the year 1,870,000 3,200,000 4,930,000

Explanation / Answer

Computation of % Completion & Gross Profit 2018 2019 2020 Contract price $10,000,000 $10,000,000 $10,000,000 Estimated cost: Cost To date $2,204,000 $5,396,000 $7,820,400 Estimated costs To Complete $5,396,000 $2,204,000 Estimated Total costs $7,600,000 $7,600,000 $7,820,400 % Completed 29% 71% 100% Estimated Total gross profit $2,400,000 $2,400,000 $2,179,600 Total Gross profit To be Recognized $696,000 $1,704,000 $2,179,600 Gross profit Recognized in Previous years $0 $696,000 $1,704,000 Gross profit Recognized during the current year $696,000 $1,008,000 $475,600 JOURNAL ENTRIES: Date AccountTittle & Explanation Debit Credit 2018 Construction In Progress $2,204,000 Material /Cash/Payable $2,204,000 To Record Cost Incurred Account Receivable $2,140,000 Billing on Construction under Progress $2,140,000 To Record Billing Cash $1,870,000 Accounr Receivab;e $1,870,000 To Record Collection Construction in Process (gross profit) $696,000 Construction Expenses $2,204,000 Revenue from long term Contracts $2,900,000 (To Record Revenue and gross profit) 2019 Construction in process $3,192,000 Materials/Cash/payables $3,192,000 (To Record costs incurred) Accounts Receivable $3,256,000 Billings on Construction in process $3,256,000 (To Record Billings) Cash $3,200,000 Accounts Receivable $3,200,000 (To Record collections) Construction in process (gross profit) $1,008,000 Construction Expenses $3,192,000 Revenue from long term Contracts $4,200,000 (To Record Revenue and gross profit) 2020 Construction in process $2,424,400 Materials/Cash/payables $2,424,400 (To Record costs incurred) Accounts Receivable $4,604,000 Billings on Construction in process $4,604,000 (To Record Billings) Cash $4,930,000 Accounts Receivable $4,930,000 (To Record collections) Construction in process (gross profit) $475,600 Construction Expenses $2,424,400 Revenue from long term Contracts $2,900,000 (To Record Revenue and gross profit)

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