In 2018, the Westgate Construction Company entered into a contract to construct a road for Santa Clara...

3.8 Ratings (736 Votes)


	2018	2019	2020
Contract price	$ 10,000,000	$ 10,000,000	$ 10,000,000

Actual costs to date	$ 2,400,000	$ 6,000,000	$ 8,200,000
Estimated costs	$ 5,600,000	$ 2,000,000
total estimated costs	$ 8,000,000	$ 8,000,000	$ 8,200,000

Estimated gross profit (loss)	$ 2,000,000	$ 2,000,000	$ 1,800,000


revenue recognition

2018:(24000000/8000000)=	30%
30%*10000000=	$ 3,000,000

2019:(6000000/8000000)=	75%
(75%*10000000)-3000000=	$ 4,500,000

2020:10000000-3,000,000-4500000=	$ 2,500,000

Gross profit (loss) recognition:
2018:3000000-2400000=	$ 600,000
2019:4500000-3600000=	$ 900,000
2020:2500000-2200000=	$ 300,000


Journal entries
	2018		2019		2020
	Debit	Credit	Debit	Credit	Debit	Credit

Construction in progress	$ 2,400,000		$ 3,600,000		$ 2,200,000
Various accounts		$ 2,400,000		$ 3,600,000		$ 2,200,000

Accounts receivable	$ 2,000,000		$ 4,000,000		$ 4,000,000
Billings on construction contract		$ 2,000,000		$ 4,000,000		$ 4,000,000

Cash	$ 1,800,000		$ 3,600,000		$ 4,600,000
Accounts receivable		$ 1,800,000		$ 3,600,000		$ 4,600,000

Construction In progress	$ 600,000		$ 900,000		$ 300,000
Cost of construction	$ 2,400,000		$ 3,600,000		$ 2,200,000
Revenue from long term contracts		$ 3,000,000		$ 4,500,000		$ 2,500,000

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2-a. In thejournal below, complete the necessary journal entries (constructioncosts, progress billings, cash collections, gross profit/loss) forthe year 2018 (credit "Various accounts" for construction costsincurred). 2-b. In thejournal below, complete the necessary journal entries (constructioncosts, progress billings, cash collections, gross profit/loss) forthe year 2019 (credit "Various accounts" for construction costsincurred). 2-c. In thejournal below, complete the necessary journal entries (constructioncosts, progress billings, cash collections, gross profit/loss) forthe year 2020 (credit "Various accounts" for construction costsincurred).

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