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

Answer 1

Dear student, we cannot able to post solution more than four sub parts of question as per our policy.

Answer 1
Revenue Recognize = Cost incurred plus Gross Profit Less Gross Loss (if any)
Gross profit Recognize under completed contract method when Company completed contract.
Gross Profit from Contract = 10000000-2400000-3600000-2200000			1,800,000
Year	2018	2019	2020
Gross profit	0	0	1,800,000
Revenue	2,400,000	3,600,000	4,000,000
Answer 2
Date	General Journal	Debit	Credit
2018	Construction in progress	2,400,000
	Various accounts		2,400,000
	(To record cost incurred in Progress.)
2018	Accounts receivable	2,000,000
	Billings on construction contract		2,000,000
	(To record Billings to Customer.)
2018	Cash	1,800,000
	Accounts receivable		1,800,000
	(To record cash collected from customer.)
2018	Cost of construction	2,400,000
	Revenue from long-term contracts		2,400,000
	(To record recognize Revenue.)
2019	Construction in progress	3,600,000
	Various accounts		3,600,000
	(To record cost incurred in Progress.)
2019	Accounts receivable	4,000,000
	Billings on construction contract		4,000,000
	(To record Billings to Customer.)
2019	Cash	3,600,000
	Accounts receivable		3,600,000
	(To record cash collected from customer.)
2019	Cost of construction	3,600,000
	Revenue from long-term contracts		3,600,000
	(To record recognize Revenue.)
2020	Construction in progress	2,200,000
	Various accounts		2,200,000
	(To record cost incurred in Progress.)
2020	Accounts receivable	4,000,000
	Billings on construction contract		4,000,000
	(To record Billings to Customer.)
2020	Cash	4,600,000
	Accounts receivable		4,600,000
	(To record cash collected from customer.)
2020	Construction in progress	1,800,000
	Cost of construction	2,200,000
	Revenue from long-term contracts		4,000,000
	(To record recognize Revenue.)

Answer 3
Partial balance sheet
	2018		2019
Current assets
Account receivable		200,000		600,000
Construction in progress	2,400,000		6,000,000
Less: Billings	2,000,000		6,000,000
Cost in excess of Billings		400,000		0
Current liability

Answer 4
Revenue Recognize = Cost incurred plus Gross Profit Less Gross Loss (if any)
Gross profit Recognize under completed contract method when Company completed contract.
Gross Profit from Contract = 10000000-2400000-3800000-3200000			600,000
Year	2018	2019	2020
Gross profit	0	0	600,000
Revenue	2,400,000	3,800,000	3,800,000