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 | $ | 2,184,000 | $ | 3,510,000 | $ | 2,316,600 | |||
| Estimated costs to complete as of year-end | 5,616,000 | 2,106,000 | 0 | ||||||
| Billings during the year | 1,800,000 | 3,894,000 | 4,306,000 | ||||||
| Cash collections during the year | 1,600,000 | 3,400,000 | 5,000,000 | ||||||
Assume that Westgate Construction's contract with Santa Clara County does not qualify for revenue recognition over time.
Westgate recognizes revenue over time according to percentage of completion.
1. Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years.
2a. In the journal below, complete the necessary journal entries for the year 2021 (credit "Various accounts" for construction costs incurred)
2b. In the journal below, complete the necessary journal entries for the year 2022 (credit "Various accounts for construction costs incurred)
2c. 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 2021and 2022 showing any items related to the contract. Indicate whether any of the amounts shown are contract assets or contract liabilities
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 | $ | 2,520,000 | $ | 3,860,000 | $ | 3,220,000 | |||
| Estimated costs to complete as of year-end | 5,720,000 | 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 | |||||||
| Costs incurred during the year | $ | 2,520,000 | $ | 3,860,000 | $ | 4,080,000 | |||
| Estimated costs to complete as of year-end | 5,720,000 | 4,220,000 | 0 | ||||||
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 | |
| Revenue | |||
| Gross profit (loss) |
Solutions
Expert Solution
1.
|
Particulars |
2021 |
2022 |
2023 |
|
|
Cost incurred till previous year |
- |
21,84,000 |
56,94,000 |
|
|
Add |
Cost incurred during the year |
21,84,000 |
35,10,000 |
23,16,600 |
|
Total cost incurred till date |
21,84,000 |
56,94,000 |
80,10,600 |
|
|
Add |
Estimated cost to be incurred |
56,16,000 |
21,06,000 |
- |
|
Total estimated cost to be incurred |
78,00,000 |
78,00,000 |
80,10,600 |
|
|
(A) |
Percentage of Completion |
28.00 |
73.00 |
100.00 |
|
(Cost incurred till date/Total estimated cost) |
||||
|
(B) |
Total Revenue |
1,00,00,000 |
1,00,00,000 |
1,00,00,000 |
|
Revenue to be recognised |
28,00,000 |
73,00,000 |
1,00,00,000 |
|
|
Less: |
Revenue Recognised in previous year |
- |
28,00,000 |
73,00,000 |
|
Revenue Recognised in current year |
28,00,000 |
45,00,000 |
27,00,000 |
|
|
Particulars |
2021 |
2022 |
2023 |
|
|
Revenue |
28,00,000 |
45,00,000 |
27,00,000 |
|
|
Less |
Cost Incurred |
21,84,000 |
35,10,000 |
23,16,600 |
|
Gross Profit |
6,16,000 |
9,90,000 |
3,83,400 |
2a.
|
Date |
Account Title and Explanation |
Debit ($) |
Credit ($) |
|
2021 |
Construction in Progress |
2,184,000 |
|
|
Various Accounts |
2,184,000 |
||
|
(To record cost incurred during the year) |
|||
|
2021 |
Accounts Receivable |
1,800,000 |
|
|
Billings on Contruction Contract |
1,800,000 |
||
|
(To record bills issued during the year) |
|||
|
2021 |
Cash |
1,600,000 |
|
|
Accounts Receivable |
1,600,000 |
||
|
(To record cash received during the year) |
2b.
|
Date |
Account Title and Explanation |
Debit ($) |
Credit ($) |
|
2022 |
Construction in Progress |
3,510,000 |
|
|
Various Accounts |
3,510,000 |
||
|
(To record cost incurred during the year) |
|||
|
2022 |
Accounts Receivable |
3,894,000 |
|
|
Billings on Contruction Contract |
3,894,000 |
||
|
(To record bills issued during the year) |
|||
|
2022 |
Cash |
3,400,000 |
|
|
Accounts Receivable |
3,400,000 |
||
|
(To record cash received during the year) |
2c.
|
Date |
Account Title and Explanation |
Debit ($) |
Credit ($) |
|
2023 |
Construction in Progress |
2,316,000 |
|
|
Various Accounts |
2,316,000 |
||
|
(To record cost incurred during the year) |
|||
|
2023 |
Accounts Receivable |
4,306,000 |
|
|
Billings on Contruction Contract |
4,306,000 |
||
|
(To record bills issued during the year) |
|||
|
2023 |
Cash |
5,000,000 |
|
|
Accounts Receivable |
5,000,000 |
||
|
(To record cash received during the year) |
3.
|
Balance Sheet (Partial |
2021 |
2022 |
|
Current Assets: |
2,00,000 |
6,94,000 |
|
Accounts Receivable |
||
|
Construction in Progress |
21,84,000 |
56,94,000 |
|
Less: Billings |
18,00,000 |
56,94,000 |
|
Costs in excess of Billings |
3,84,000 |
- |
4.
|
Particulars |
2021 |
2022 |
2023 |
|
|
Cost incurred till previous year |
- |
25,20,000 |
63,80,000 |
|
|
Add |
Cost incurred during the year |
25,20,000 |
38,60,000 |
32,20,000 |
|
Total cost incurred till date |
25,20,000 |
63,80,000 |
96,00,000 |
|
|
Add |
Estimated cost to be incurred |
57,20,000 |
- |
- |
|
Total estimated cost to be incurred |
82,40,000 |
63,80,000 |
96,00,000 |
|
|
(A) |
Percentage of Completion |
30.58 |
100.00 |
100.00 |
|
(Cost incurred till date/Total estimated cost) |
||||
|
(B) |
Total Revenue |
1,00,00,000 |
1,00,00,000 |
1,00,00,000 |
 ekkarill92 answered 1 year agoRelated SolutionsIn 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
$
1,584,000
$
3,240,000
$
2,613,600
Estimated costs to complete as of year-end
5,616,000
2,376,000
0
Billings during the year
1,200,000
3,624,000
5,176,000
Cash collections during the year
1,000,000
2,800,000
6,200,000
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:
2021
2022
2023
Cost incurred during the year
$
2,100,000
$
3,150,000
$
2,475,000
Estimated costs to complete as of year-end
5,400,000
2,250,000
0
Billings during the year
2,150,000
3,100,000
4,750,000
Cash collections during the year
1,875,000
3,100,000
5,025,000
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
$
3,471,000
$
4,005,000
$
1,566,400
Estimated costs to complete as of year-end
5,429,000
1,424,000
0
Billings during the year
2,900,000
4,576,000
2,524,000
Cash collections during the year
2,700,000
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
$
2,400,000
$
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...
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...
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