Question

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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	$	2,640,000		$	2,300,000		$	2,926,000
Estimated costs to complete as of year-end		6,160,000			2,660,000			0
Billings during the year		2,080,000			2,860,000			5,060,000
Cash collections during the year		1,840,000			2,800,000			5,360,000

Westgate recognizes revenue over time according to percentage of completion.

Required:
1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years. (Do not round intermediate calculations. Loss amounts should be indicated with a minus sign.)

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. (Do not round intermediate calculations.)

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. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)

	2021			2022			2023
Costs incurred during the year	$	2,640,000		$	3,840,000		$	3,240,000
Estimated costs to complete as of year-end		6,160,000			3,140,000			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. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)

	2021			2022			2023
Costs incurred during the year	$	2,640,000		$	3,840,000		$	4,020,000
Estimated costs to complete as of year-end		6,160,000			4,180,000			0

Answer 1

Question 1

Particulars	Year 2021($)	Year 2022($)	Year 2023($)	Total($)
Contract Revenue				10,000,000
Cost incurred till date	2,640,000	2,300,000	2,926,000	7,866,000
Estimated Cost to complete	6,160,000	2,660,000	0	8,820,000
Total cost to complete estimate	8,800,000	8,820,000	7,866,000
	(2,640,000+6 ,160,000)	(6,160,000+2,660,000)	(Actual Cost)
Billing during the year	2,080,000	2,860,000	5,060,000
Cash collected during the year	1,840,000	2,800,000	5,360,000
Percentage of Completion	30%	56%	100%
(Cost incurred till date/Total Estimated Cost)*100	(2,640,000/8,800,000)*100	(4,940,000/8,820,000)*100
Revenue to be recognized during the year	3,000,000	2,600,000	4,400,000
	10,000,000*30%	(10,000,000*56%)-3,000,000	10,000,000-5,600,000
Cost Incurred till date	2,640,000	2,300,000	2,926,000
Gross profit to be recognized during the year	360,000	300,000	1,474,000
Question 2
(a)	Journal entries for the year 2021
1.	Construction In Progress a/c Dr	2,640,000
	To, Payabales A/c		2,640,000
2.	Accounts Receivable A/c Dr	2,080,000
	To, Billing		2,080,000
3.	Cash A/c Dr	1,840,000
4.	Construction in Progress A/c Dr	360,000
	Construction Expenses A/c Dr	2,640,000
	To, Construction Revenue Account		3,000,000