In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara
Question:
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 | $ | 2,400,000 | | $ | 3,600,000 | | $ | 2,200,000 | |
| Estimated costs to complete as of year-end | | 5,600,000 | | | 2,000,000 | | | 0 | |
| Billings during the year | | 2,000,000 | | | 4,000,000 | | | 4,000,000 | |
| Cash collections during the year | | 1,800,000 | | | 3,600,000 | | | 4,600,000 | |
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.
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 | 2019 | 2020 | ||||||
| Cost incurred during the year | $ | 2,400,000 | | $ | 3,800,000 | | $ | 3,200,000 | |
| Estimated costs to complete as of year-end | | 5,600,000 | | | 3,100,000 | | | 0 | |
| | |||||||||
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.
| | 2018 | 2019 | 2020 | ||||||
| Cost incurred during the year | $ | 2,400,000 | | $ | 3,800,000 | | $ | 3,900,000 | |
| Estimated costs to complete as of year-end | | 5,600,000 | | | 4,100,000 | | | 0 | |
| | |||||||||
Expert Answer:
Requirement 1 Year Revenue Gross Profit 2018 2019 2020 10000000 1800000 Total Revenue 10000000 Less ... View the full answer
Intermediate Accounting
ISBN: 978-0078025839
9th edition
Authors: J. David Spiceland, James Sepe , Mark Nelson , Wayne Thomas
