Hot Weelz Ltd., which began operations in January 2015, follows IFRS and is subject to a 30% income tax rate. In 2018, the following events took place:

a) The company switched from the zero-profit method to the percentage-of-completion method of accounting for its long-term construction projects. This change was a result of experience with the project and improved ability to estimate the costs to completion and therefore the percentage complete.

b) Due to a change in maintenance policy, the estimated useful life of Hot Weelz’s fleet of trucks was lengthened.

c) It was discovered that a machine with an original cost of $220,000, residual value of $30,000, and useful life of four years was expensed in error on January 23, 2017, when it was acquired. This situation was discovered after preparing the 2018 adjusting entries but before calculating income tax expense and closing the accounts. Hot Weelz uses straight-line depreciation and takes a full year of depreciation in the year of acquisition. The asset’s cost had been appropriately added to the capital cost allowance (CCA) class in 2017 before the CCA was calculated and claimed.

d) As a result of an inventory study early in 2018 after the accounts for 2017 had been closed, management decided that the weighted average cost formula would provide a more relevant presentation in the financial statements than the FIFO cost formula. In making the change to weighted average cost, Hot Weelz determined the following:

Required:

1. Analyze each of the four 2018 events described above. For each event, identify the type of accounting change that has occurred, and indicate whether it should be accounted for with full retrospective application, partial retrospective application, or prospective application.

2. Prepare any necessary journal entries that would be recorded in 2018 to account for events C (ignore income tax considerations) and D.

You are doing a review services and related tax work engagement for Murphy Construction Company. You have made extensive inquiries of management about their financial statements and have concluded that management has an excellent understanding of its business and is honest, but lacking in knowledge of technical accounting issues. In doing the review you determine the following: 1. Repairs and maintenance expense has increased significantly compared to the preceding year. The president states that this seems to have been a year with a lot of repairs, in part because their equipment is getting older. 2. Property tax expense is the same as last year even though Murphy purchased a new building, including the land. The president states that there are no real estate taxes on the new building and land until next year. 3. Based on your knowledge of the construction industry you know that the pipes Murphy uses in construction have had a decrease in selling price to construction companies near the end of the current year. The president states that even though they have a large pipe inventory it will all be used in the next year or two, so the current price doesn’t matter because they won’t need to buy any. 4. Accounts receivable has increased almost 25% compared to the previous year, but the allowance for uncollectible accounts has stayed the same. The president states that even though receivables have increased, they still expect uncollectible accounts to be less than the stated allowance. 5. In discussions with the president you determine that there is a material uninsured lawsuit against the company from a former customer. The president believes it is a frivolous lawsuit and will not permit a footnote about it for fear that it will result in similar lawsuits from other customers.

Required

a. Beyond inquiries and analytical procedures, what are the accountant’s responsibilities in performing review service engagements?

b. Describe what you should do in each of the preceding situations, assuming each one is material.

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 $ 2,400,000 $ 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 Westgate Construction uses the completed contract method of accounting for long-term construction contracts.

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 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).

3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 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. 2018 2019 2020 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. 2018 2019 2020 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

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:

Westgate Construction uses the completed contract method of accounting for long-term construction contracts.

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 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).
3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 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.

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.

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:

Westgate Construction uses the completed contract method of accounting for long-term construction contracts.

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 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).
3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 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.

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.

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:

Westgate Construction uses the completed contract method of accounting for long-term construction contracts.

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 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).
3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 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.

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.

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 $ 1,491,000 $ 3,195,000 $ 2,655,400 Estimated costs to complete as of year-end 5,609,000 2,414,000 0 Billings during the year 1,100,000 3,586,000 5,314,000 Cash collections during the year 900,000 2,700,000 6,400,000 Westgate Construction uses the completed contract method of accounting for long-term construction contracts. 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 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). 3. Complete the information required below to prepare a partial balance sheet for 2018 and 2019 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. 2018 2019 2020 Cost incurred during the year $ 2,590,000 $ 3,895,000 $ 3,290,000 Estimated costs to complete as of year-end 5,790,000 3,290,000 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. 2018 2019 2020 Cost incurred during the year $ 2,590,000 $ 3,895,000 $ 4,185,000 Estimated costs to complete as of year-end 5,790,000 4,290,000 0

In February 2020, Sandhill Construction signed a contract and commenced construction on a parking garage. The total contract price was $90.8 million and was expected to be completed in July 2024 at a total estimated cost of $83.0 million. Payment by the customer was to be made in several stages, based on significant events and dates throughout the construction timeline. The customer was to have control over the parking garage and was able to make major changes to the project during the construction process. Sandhill’s year-end was September 30.

By the end of September, 2020, Sandhill had incurred $20,750,000 in costs and had invoiced $10,400,000 in progress billings. $7,600,000 of the progress billings had been collected.

By September 30, 2021, Sandhill had incurred $40,200,000 in total costs and had invoiced $45,500,000 in progress billings, including the progress billings in 2020. Of the total billings, $30,500,000 in total had been collected. Also, Sandhill reviewed its cost estimates on the project, and now believed the parking garage would cost $80.4 million in total to complete.

Prepare all journal entries required for the year ended September 30, 2020. Use Materials, Cash, Payables for costs incurred to date.

Prepare all journal entries required for the year ended September 30, 2021. Use Materials, Cash, Payables for costs incurred to date.