In 2016, the Westgate Construction Company entered into a contract to construct
ID: 2597094 • Letter: I
Question
In 2016, 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 2018. Information related to the contract is as follows: 2016 5,561,000 2018 Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year 2017 $2,739,000 $3,735,000 $2,008,600 1,826,000 2,300,000 4,174,000 3,526,000 2,070,000 3,900,000 4,000,000 Westgate Construction uses the completed contract method of accounting for long-term construction contracts Required: 1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years (Loss amounts should be indicated with a minus sign.) 2016 2017 2018 Revenue Gross profit (loss)Explanation / Answer
1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. (Loss amounts should be indicated with a minus sign.)
2016 2017 2018
Revenue 0 0 10,000,000
Gross profit (loss) 0 0 465,400
2a. In the journal below, complete the necessary journal entries for the year 2016 (credit "Various accounts" for construction costs incurred). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Date General Journal Debit Credit
2016 Construction in progress 2,739,000
Various accounts 2,739,000
2016 Accounts receivable 2,300,000
Billings on construction contract 2,300,000
2016 Cash 2,070,000
Accounts receivable 2,070,000
2016 No journal entry required
2b. In the journal below, complete the necessary journal entries for the year 2017 (credit "Various accounts" for construction costs incurred). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Date General Journal Debit Credit
2017 Construction in progress 3,735,000
Various accounts 3,735,000
2017 Accounts receivable 4,174,000
Billings on construction contract 4,174,000
2017 Cash 3,900,000
Accounts receivable 3,900,000
2017 No journal entry required
2c
Date General Journal Debit Credit
2018 Construction in progress 2,008,600
Various accounts 2,008,600
2018 Accounts receivable 3,526,000
Billings on construction contract 3,526,000
2018 Cash 4,000,000
Accounts receivable 4,000,000
2018 No journal entry required
.
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