Question
In: Accounting
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 Clara
County does not qualify for revenue recognition over time.
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 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).
3. Complete the information required below to
prepare a partial balance sheet for 2021 and 2022 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.
| 2021 | 2022 | 2023 | |||||||
| 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.
| 2021 | 2022 | 2023 | |||||||
| 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 | ||||||
Solutions
Expert Solution
1)
| Year | Revenue Recognized | Gross Profit Recognised |
| 2021 | 3000000 | 600000 |
| 2022 | 4500000 | 900000 |
| 2023 | 2500000 | 300000 |
2a) Journal Entries for 2021:
| Date | General Journal | Debit | Credit |
| 2021 | Construction In progress | 2400000 | |
| Materials, Cash, Payables | 2400000 | ||
| 2021 | Accounts Receivables | 2000000 | |
| Billings on Construction Contract | 2000000 | ||
| 2021 | Cash | 1800000 | |
| Accounts Receivables | 1800000 | ||
| 2021 | Construction In Progress | 600000 | |
| Construction Exp. | 2400000 | ||
| Revenue from Contract | 3000000 |
2b) Journal Entries for 2022:
| Date | General Journal | Debit | Credit |
| 2022 | Construction In progress | 3600000 | |
| Materials, Cash, Payables | 3600000 | ||
| 2022 | Accounts Receivables | 4000000 | |
| Billings on Construction Contract | 4000000 | ||
| 2022 | Cash | 3600000 | |
| Accounts Receivables | 3600000 | ||
| 2022 | Construction In Progress | 900000 | |
| Construction Exp. | 3600000 | ||
| Revenue from Contract | 4500000 |
2c) Journal Entries for 2023:
| Date | General Journal | Debit | Credit |
| 2023 | Construction In progress | 2200000 | |
| Materials, Cash, Payables | 2200000 | ||
| 2023 | Accounts Receivables | 4000000 | |
| Billings on Construction Contract | 4000000 | ||
| 2023 | Cash | 4600000 | |
| Accounts Receivables | 4600000 | ||
| 2023 | Construction In Progress | 300000 | |
| Construction Exp. | 2200000 | ||
| Revenue from Contract | 2500000 |
3) Partial Balance sheet for 2020 and 2021:
| Balance Sheet Partial | 2021 | 2022 | ||
| Current Assets: | ||||
| Accounts Receivables | 200000 | 600000 | ||
| Construction in Progress | 3000000 | 7500000 | ||
| Less: Billings | -2000000 | -6000000 | ||
| Costs and Profits in excess of billings | 1000000 | 1500000 | ||
| Current Liabilities: | ||||
| Working for Accounts Receivables: | 2021 | 2022 | ||
| Beginning Balance | 0 | 200000 | ||
| Billings | 2000000 | 4000000 | ||
| Less: Collections | -1800000 | -3600000 | ||
| Closing Balance | 200000 | 600000 |
4)
| Year | Revenue Recognized | Gross Profit Recognised |
| 2021 | 3000000 | 600000 |
| 2022 | 3666667 | -133333 |
| 2023 | 3333333 | 133333 |
Working Note:
| % of Completion | |||
| Actual Costs to date / Total Estimated costs = % of completion | |||
| Actual Costs to date | Estimated total costs | ||
| 2021 | 2400000 | 8000000 | 30% |
| 2022 | 6200000 | 9300000 | 67% |
| 2023 | 9400000 | 9400000 | 100% |
5)
| Year | Revenue Recognized | Gross Profit Recognised |
| 2021 | 3000000 | 600000 |
| 2022 | 3019417 | -780583 |
| 2023 | 3980583 | 80583 |
Working Note:
| % of Completion | |||
| Actual Costs to date / Total Estimated costs = % of completion | |||
| Actual Costs to date | Estimated total costs | ||
| 2021 | 2400000 | 8000000 | 30% |
| 2022 | 6200000 | 10300000 | 60% |
| 2023 | 10100000 | 10100000 | 100% |
ekkarill92 answered 2 years agoRelated Solutions
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
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Estimated costs to complete as of year-end
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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
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2023
Cost incurred during the year
$
2,100,000
$
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$
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Estimated costs to complete as of year-end
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2,250,000
0
Billings during the year
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3,100,000
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Cash collections during the year
1,875,000
3,100,000
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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:
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2022
2023
Cost incurred during the year
$
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Estimated costs to complete as of year-end
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0
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4,576,000
2,524,000
Cash collections during the year
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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
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
5. Calculate the amount of revenue and...
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
$
2,490,000
$
3,984,000
$
2,008,600
Estimated costs to complete as of year-end
5,810,000
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...
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 $ 2,072,000 $ 2,738,000 $ 2,849,000 Estimated costs to
complete as of year-end 5,328,000 2,590,000 0 Billings during the
year 2,160,000 2,650,000 5,190,000 Cash collections during the year
1,880,000 2,700,000 5,420,000 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 $ 2,072,000 $ 2,738,000 $ 2,849,000 Estimated costs to
complete as of year-end 5,328,000 2,590,000 0 Billings during the
year 2,160,000 2,650,000 5,190,000 Cash collections during the year
1,880,000 2,700,000 5,420,000 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
$
2,072,000
$
2,738,000
$
2,849,000
Estimated costs to complete as of year-end
5,328,000
2,590,000
0
Billings during the year
2,160,000
2,650,000
5,190,000
Cash collections during the year
1,880,000
2,700,000
5,420,000
Westgate recognizes revenue over time according to...
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