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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	$	2,204,000		$	3,192,000		$	2,424,400
Estimated costs to complete as of year-end		5,396,000			2,204,000			0
Billings during the year		2,140,000			3,256,000			4,604,000
Cash collections during the year		1,870,000			3,200,000			4,930,000

Westgate recognizes revenue over time according to percentage of completion.

rev: 09_15_2017_QC_CS-99734

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).

Answer 1

Computation of % Completion & Gross Profit
		2018	2019	2020
	Contract price	$10,000,000	$10,000,000	$10,000,000
	Estimated cost:
	Cost To date	$2,204,000	$5,396,000	$7,820,400
	Estimated costs To Complete	$5,396,000	$2,204,000
	Estimated Total costs	$7,600,000	$7,600,000	$7,820,400
	% Completed	29%	71%	100%
	Estimated Total gross profit	$2,400,000	$2,400,000	$2,179,600
	Total Gross profit To be Recognized	$696,000	$1,704,000	$2,179,600
	Gross profit Recognized in Previous years	$0	$696,000	$1,704,000
	Gross profit Recognized during the current year	$696,000	$1,008,000	$475,600

	JOURNAL ENTRIES:
Date	AccountTittle & Explanation	Debit	Credit
2018	Construction In Progress	$2,204,000
	Material /Cash/Payable		$2,204,000
	To Record Cost Incurred
	Account Receivable	$2,140,000
	Billing on Construction under Progress		$2,140,000
	To Record Billing
	Cash	$1,870,000
	Accounr Receivab;e		$1,870,000
	To Record Collection
	Construction in Process (gross profit)	$696,000
	Construction Expenses	$2,204,000
	Revenue from long term Contracts		$2,900,000
	(To Record Revenue and gross profit)
2019	Construction in process	$3,192,000
	Materials/Cash/payables		$3,192,000
	(To Record costs incurred)
	Accounts Receivable	$3,256,000
	Billings on Construction in process		$3,256,000
	(To Record Billings)
	Cash	$3,200,000
	Accounts Receivable		$3,200,000
	(To Record collections)
	Construction in process (gross profit)	$1,008,000
	Construction Expenses	$3,192,000
	Revenue from long term Contracts		$4,200,000
	(To Record Revenue and gross profit)
2020	Construction in process	$2,424,400
	Materials/Cash/payables		$2,424,400
	(To Record costs incurred)
	Accounts Receivable	$4,604,000
	Billings on Construction in process		$4,604,000
	(To Record Billings)
	Cash	$4,930,000
	Accounts Receivable		$4,930,000
	(To Record collections)
	Construction in process (gross profit)	$475,600
	Construction Expenses	$2,424,400
	Revenue from long term Contracts		$2,900,000
	(To Record Revenue and gross profit)