Question

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

Westgate recognizes revenue over time according to percentage of completion.

2-a. In the journal below, complete the necessary journal entries for the year 2021 (credit "Various accounts" for construction costs incurred).
2-b. In the journal below, complete the necessary journal entries for the year 2022 (credit "Various accounts" for construction costs incurred).
2-c. In the journal below, complete the necessary journal entries for the year 2023 (credit "Various accounts" for construction costs incurred).

Answer 1

Answer Page: No ① "26),20 € 20 2023 * porc Estimated fotol cool Necessary jowinal entries that the years 2001, 2022 and 2023 Westgate construction company gross poche Caleulations Particular 2021 2022 Contract porice $10,000,000 $10,000,000 $10,000,000 cost incurred during the year $2400,000 $3600,000 $ 2200,000 cost incurred to data $2400,000 $6000,000 $8200,000 Estimated cost to complete $5600,000 $ 2000,000 $0 $8000,000 $8000,000 $8200,000 Ccool.incurred to deste estimated costromolte pe Percentage complete 30% . 75% (coof in ewered to dateſ estimated tabelecer) Revenue to be recognized $3000,000 $4500,000 $3500,000 Grons profit ftions) $600,000 $900,000 $300,000 Billings during the year $ 2000,000 $ 4000,000 € 4000,000 cash collections during the year $1800,000 $3600,000 $ 4600,000 2001 Cook incurred to dette = $2400,000 2400,000 XLOO 30% 100% 1. complete = 3000,000

page.no @ te = $5600,000 Esfirmated cook to complete' = $5600,000 Revenue to be orecognized = (costract price X %. complete) -- revenue previously recogniged (10,000,000 X 30 %-) - 0. =$ 3000,000 Gross profit (oss) = 3000,000 - 2400,000 = $ 600,000 Billings during the year = $ 2000,000 2022 coof incurred to date = = 2400,000 + 3600,000 $6000,000 t. complete Complete 6000,000 8000,000 x 100 = 75%. Revenue to be srecognized = [roec 9000 x 45%)- 3000,000 = $ 4500,000 Gross profit I (tom) = 4500,000 -- 3600,000 = $900,000

6 Page No ③ 2013 coot incwued to date = 6000,000 + 2200,000 = $8200,000 % complete = 8200,000 x 100 = 100% 6300,000 Revenue to be recognized = (100%, X10,000,000) –3000.000 – 4500,000 E = $ 2500,000 Grous profit I (com) = 2500,000 - 2000,000 = $ 300,000 coses incurred Journal entries 2021 2022 2023 Debitch) Gredit (1) detail) credilce) debitch) Grechit ct) CIP(work in procex) $2400,000 - $36.00pm - 2200,000 - cash $2400,000 - 3600,000 - 2200,000 Accounts receivable 2000,000 - 4000,00 - 400000 Billings CIP 2000,000 - 4000,000 - 4000,000 Receiving . Cash 1800,000 - 3600,000 - 4600,000 - Payments b loccoli geceivable accounts receivable - 1800,000 - 3600,000 - 4600,000 Period end adiunt construction expense 2400,000 - 3600,00 - 20000 - ments for tevenue CIP(work in process) 600,000 - Cgross profit entry) construction Yevenue Completing the Billings on CIP project clip{work in process) 900,000 - 300,000 - 3000,000 - 4500,000 - 2500,000 10,000,000 - 10,000,000