Question
In: Accounting
In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000.
In 2021, 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 2023. Information related to the contract is as follows:
| 2021 | 2022 | 2023 | |||||||
| Cost incurred during the year | $ | 2,610,000 | $ | 3,162,000 | $ | 2,230,800 | |||
| Estimated costs to complete as of year-end | 6,390,000 | 2,028,000 | 0 | ||||||
| Billings during the year | 2,100,000 | 3,672,000 | 4,228,000 | ||||||
| Cash collections during the year | 1,850,000 | 3,000,000 | 5,150,000 | ||||||
Westgate recognizes revenue over time according to percentage of completion.
2-a. In the journal below, complete the necessary journal entries for the year 2021 (credit "Various accounts" for construction costs incurred).
2-b. In the journal below, complete the necessary journal entries for the year 2022 (credit "Various accounts" for construction costs incurred).
2-c. In the journal below, complete the necessary journal entries for the year 2023 (credit "Various accounts" for construction costs incurred).
Solutions
Expert Solution
ANSWER :
2-a
| Date | General journal | Debit | Credit |
| 2021 | Construction in progress | $ 2610000 | |
| Various account | $ 2610000 | ||
| ( To record cost incurred ) | |||
| 2021 | Account receivable | $ 2100000 | |
| Billing on construction | $ 2100000 | ||
| ( To record billing during the year ) | |||
| 2021 | Cash | $ 1850000 | |
| Account receivable | $ 1850000 | ||
| ( To record cash collected from customer ) | |||
| 2021 | Construction in progress | $ 290000 | |
| Cost of construction | $ 2610000 | ||
| Construction Revenue | $ 2900000 | ||
| ( To record recognize revenue ) |
2-b
| Date | General journal | Debit | Credit |
| 2022 | Construction in progress | $3162000 | |
| Various account | $ 3162000 | ||
| ( To record cost incurred ) | |||
| 2022 | Account receivable | $ 3,672,000 | |
| Billing on construction | $ 3,672,000 | ||
| ( To record billing during the year ) | |||
| 2022 | Cash | $ 3000000 | |
| Account receivable | $ 3000000 | ||
| ( To record cash collected from customer ) | |||
| 2022 | Construction in progress | $ 1338000 | |
| Cost of construction | $ 3162000 | ||
| Construction Revenue | $ 4500000 | ||
| ( To record recognize revenue ) |
2-c
| Date | General journal | Debit | Credit |
| 2023 | Construction in progress | $ 2230800 | |
| Various account | $ 2230800 | ||
| ( To record cost incurred ) | |||
| 2023 | Account receivable | $ 4228000 | |
| Billing on construction | $ 4228000 | ||
| ( To record billing during the year ) | |||
| 2023 | Cash | $ 5150000 | |
| Account receivable | $ 5150000 | ||
| ( To record cash collected from customer ) | |||
| 2023 | Construction in progress | $ 369200 | |
| Cost of construction | $ 2230800 | ||
| Construction Revenue | $ 2600000 | ||
| ( To record recognize revenue ) | |||
| 2023 | Billing on construction contract | $ 10000000 | |
| Construction in progress | $ 10000000 | ||
| ( To record completion of contract ) |
Working note -1
Computation of revenue recognised each year
| 2021 | 2022 | 2023 | |
| Cost incurred during the year | $ 2610000 | $ 3162000 | $ 2230800 |
| Cumulative cost for the year | $ 2610000 | $ 5772000 | $ 8002800 |
| Add - Estimated cost to complete | $ 6390000 | $ 2028000 | $ 0 |
| Total estimated cost | $ 9000000 | $ 7800000 | $ 8002800 |
| Completion % (Cumulative cost *100/ Total estimated cost ) | 29 % | 74 % | 100 % |
| Revenue recognised till date (10000000) * Completion % | $ 2900000 | $ 7400000 | $ 10000000 |
| Revenue already recognised | $ 0 | $ 2900000 | $ 7400000 |
| Revenue recognised in current year | $ 2900000 | $ 4500000 | $ 2600000 |
| less - Cost incurred during the year | $ 2610000 | $ 3162000 | $ 2230800 |
| Gross profit | $ 290000 | $ 1338000 | $ 369200 |
ekkarill92 answered 2 years agoRelated Solutions
In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000.
In 2021, 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 2023. Information related to the contract is as follows:
Westgate recognizes revenue over time according to percentage of completion.
Required:
1. Calculate the amount of revenue and gross profit to be recognized in each of the three years.
2. Prepare all necessary journal entries for each of the years (credit “Cash, Materials, etc.” for...
In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000.
In 2021, 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 2023. Information related to the contract is as follows:
2021
2022
2023
Cost incurred during the year
$
2,100,000
$
2,450,000
$
2,695,000
Estimated costs to complete as of year-end
4,900,000
2,450,000
0
Billings during the year
2,200,000
2,350,000
5,450,000...
In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa...
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contract to construct a road for Santa Clara County for
$10,000,000. The road was completed in 2023. Information related to
the contract is as follows:
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2023
Cost incurred during the year
$
1,584,000
$
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$
2,613,600
Estimated costs to complete as of year-end
5,616,000
2,376,000
0
Billings during the year
1,200,000
3,624,000
5,176,000
Cash collections during the year
1,000,000
2,800,000
6,200,000
Assume that Westgate Construction’s contract with Santa...
In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa...
In 2021, 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 2023. Information related to
the contract is as follows:
2021
2022
2023
Cost incurred during the year
$
2,100,000
$
3,150,000
$
2,475,000
Estimated costs to complete as of year-end
5,400,000
2,250,000
0
Billings during the year
2,150,000
3,100,000
4,750,000
Cash collections during the year
1,875,000
3,100,000
5,025,000
Westgate recognizes revenue over time according to...
In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa...
In 2021, 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 2023. Information related to
the contract is as follows:
2021
2022
2023
Cost incurred during the year
$
3,471,000
$
4,005,000
$
1,566,400
Estimated costs to complete as of year-end
5,429,000
1,424,000
0
Billings during the year
2,900,000
4,576,000
2,524,000
Cash collections during the year
2,700,000
4,500,000
2,800,000
Assume that Westgate Construction’s contract with Santa...
In 2021, the Westgate Construction company entered into a contract to construct a road for Santa...
In 2021, 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 2023. Information related to
the contract is as follows.
2018
2019
2020
Cost incurred during the year
$
2,044,000
$
2,628,000
$
2,890,800
Estimated costs to complete as of year-end
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0
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2,502,000
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1,885,000
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In 2021, the Westgate Construction company entered into a contract to construct a road for Santa...
In 2021, 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 2023. Information related to
the contract is as follows.
2018
2019
2020
Cost incurred during the year
$
2,044,000
$
2,628,000
$
2,890,800
Estimated costs to complete as of year-end
5,256,000
2,628,000
0
Billings during the year
2,170,000
2,502,000
5,328,000
Cash collections during the year
1,885,000
2,600,000
5,515,000
3. Complete the information required below to...
in 2021, the Westgate Construction Company entered into a contract to construct a road for Santa...
in 2021, 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 $ 2,044,000 $ 2,628,000 $ 2,890,800 Estimated costs to
complete as of year-end 5,256,000 2,628,000 0 Billings during the
year 2,170,000 2,502,000 5,328,000 Cash collections during the year
1,885,000 2,600,000 5,515,000 Westgate recognizes revenue over time
according to...
In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa...
In 2021, 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 2023. Information related to
the contract is as follows:
2021
2022
2023
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
Assume that Westgate Construction’s contract with Santa...
In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa...
In 2021, 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 2023. Information related to
the contract is as follows:
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2022
2023
Cost incurred during the year
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2,490,000
$
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$
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1,826,000
0
Billings during the year
2,030,000
4,444,000
3,526,000
Cash collections during the year
1,815,000
3,900,000
4,285,000
Westgate recognizes revenue over time according to...
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