In: Accounting
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).
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 |