In: Accounting
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 | ||||||