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In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000
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 $2,581,000 $2,347,000 $3,049,200
Estimated costs to complete 6,319,000 2,772,000 0
as of year-end
Billings during the year 2,090,000 2,838,000 5,072,000
Cash collections during the year 1,845,000 2,900,000 5,255,000
Westgate recognizes revenue over time according to percentage of completion.
, List the necessary journal entries for the year 2021 (credit "Various accounts" for construction costs incurred).
2-b. List a journal below, using the necessary journal entries for the year 2022 (credit "Various accounts" for construction costs incurred).
2-c.Show a journal below, Using the necessary journal entries for the year 2023 (credit "Various accounts" for construction costs incurred).
Date General Journal Debit Credit
Expert Solution
| Requirement 2A | |||
| Date | General Journal | Debit | Credit |
| 2021 | Construction in Progress | $2,581,000 | |
| Various accounts | $2,581,000 | ||
| (construction cost incurred) | |||
| 2021 | Accounts receivables | $2,090,000 | |
| Billing on Construction contracts | $2,090,000 | ||
| (amount billed during the year) | |||
| 2021 | Cash | $1,845,000 | |
| Accounts receivables | $1,845,000 | ||
| (cash received) | |||
| 2021 | Construction in Progress | $319,000 | |
| Cost of construction | $2,581,000 | ||
| Revenue from Long Term contract | $2,900,000 | ||
| (revenue recognised) | |||
| Requirement 2B | |||
| Date | General Journal | Debit | Credit |
| 2022 | Construction in Progress | $2,347,000 | |
| Various accounts | $2,347,000 | ||
| (construction cost incurred) | |||
| 2022 | Accounts receivables | $2,838,000 | |
| Billing on Construction contracts | $2,838,000 | ||
| (amount billed during the year) | |||
| 2022 | Cash | $2,900,000 | |
| Accounts receivables | $2,900,000 | ||
| (cash received) | |||
| 2022 | Construction in Progress | $1,153,000 | |
| Cost of construction | $2,347,000 | ||
| Revenue from Long Term contract | $3,500,000 | ||
| (revenue recognised) | |||
| Requirement 2C | |||
| Date | General Journal | Debit | Credit |
| 2023 | Construction in Progress | $3,049,200 | |
| Various accounts | $3,049,200 | ||
| (construction cost incurred) | |||
| 2023 | Accounts receivables | $5,072,000 | |
| Billing on Construction contracts | $5,072,000 | ||
| (amount billed during the year) | |||
| 2023 | Cash | $5,255,000 | |
| Accounts receivables | $5,255,000 | ||
| (cash received) | |||
| 2023 | Construction in Progress | $550,800 | |
| Cost of construction | $3,049,200 | ||
| Revenue from Long Term contract | $3,600,000 | ||
| (revenue recognised) | |||
| 2023 | Billing on Construction contracts | $10,000,000 | |
| Construction in Progress | $10,000,000 | ||
| (to record completion of contract) | |||
Workings:
| Working | 2021 | 2022 | 2023 | |
| A | Contract Price | $10,000,000 | $10,000,000 | $10,000,000 |
| B | Cost Incurred to Date | $2,581,000 | $4,928,000 | $7,977,200 |
| C | Estimated cost yet to be incurred to complete the contract | $6,319,000 | $2,772,000 | $0 |
| D = B+C | Total Cost | $8,900,000 | $7,700,000 | $7,977,200 |
| E = (B/D) x 100 | % of Completion | 29.00% | 64.00% | 100.00% |
| F = A x E | Revenue to date | $2,900,000 | $6,400,000 | $10,000,000 |
| G | Revenue of Previous year | $0 | $2,900,000 | $6,400,000 |
| H = F - G | Net Revenue this year | $2,900,000 | $3,500,000 | $3,600,000 |
| I (=B) | Cost to date | $2,581,000 | $4,928,000 | $7,977,200 |
| J | Cost to date of previous year | $0 | $2,581,000 | $4,928,000 |
| K = I - J | Net Cost for the year | $2,581,000 | $2,347,000 | $3,049,200 |
| L = H - K | Gross Profits | $319,000 | $1,153,000 | $550,800 |
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