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Required information In 2018, the Westgate Construction Company entered into a contract to construct a road...

Required information
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 $ 2,156,000 $ 3,388,000 $ 2,371,600
Estimated costs to complete as of year-end 5,544,000 2,156,000 0
Billings during the year 2,130,000 3,414,000 4,456,000
Cash collections during the year 1,865,000 3,300,000 4,835,000


Westgate recognizes revenue over time according to percentage of completion.

2-a. In the journal below, complete the necessary journal entries for the year 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).

Solutions

Expert Solution

Revenue recognized

2018 = costs incurred / total costs * contract price = 2156000/(2156000+5544000)*10000000 = 2800000

2019 = 3388000/(3388000+2156000)*(10000000 - 2800000) = 4400000

2020= 10000000-2800000 - 4400000 = 2800000

Part 2A

Date general journal debit credit
2018 construction in progress 2156000
Various accounts 2156000
2018 accounts receivable 2,130,000
Bills on construction contract 2,130,000
2018 cash 1,865,000
Accounts receivable 1,865,000
2018 construction in progress 644000
Cost of construction 2156000
Revenue from long-term contracts 2800000

Part 2 B

Date general journal debit credit
2019 construction in progress 3388000
Various accounts 3388000
2019 accounts receivable 3,414,000
Bills on construction contract 3,414,000
2019 cash 3300000
Accounts receivable 3300000
2019 construction in progress 1012000
Cost of construction 3388000
Revenue from long-term contract 4400000

Part 2 C

Date general journal debit credit
2020 construction in progress 2371600
Various accounts 2371600
2020 Accounts receivable 4,456,000
Bills on construction contract 4,456,000
2020 Cash 4835000
Accounts receivable 4835000
2020 Construction in progress 428400
Cost of construction 2371600
Revenue from long-term contract 2800000

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