In 2018, the Westgate Construction Company entered into a contract to construct

Question

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 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.
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.

Please help, i am so confused.....

2018 2019 2020 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

Explanation / Answer

As per policy only first four questions will be answered

Part 1

Revenue recognized

2018 = costs incurred / total costs * contract price = 2100000/(2100000+5400000)*10000000 = 2800000

2019 = 3150000/(3150000+2250000)*(10000000 - 2800000) = 4200000

2020= 10000000-2800000 - 4200000 = 3000000

Gross profit = revenue - expenses

2018 = 2800000-2100000 = 700000

2019 = 4200000-3150000 = 1050000

2020 = 3000000-2475000 = 525000

Part 2A

Part 2 B

Part 2 C

4750000

2018 2019 2020 Revenue recognized 2800000 4200000 3000000 Gross profit (loss) 700000 1050000 525000

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