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.
Required:
1. Calculate the amount of revenue and gross
profit (loss) to be recognized in each of the three years.
(Do not round intermediate calculations. Loss amounts
should be indicated with a minus sign.)
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).
3. Complete the information required below to prepare a partial balance sheet for 2021 and 2022 showing any items related to the contract. (Do not round intermediate calculations.)
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. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)
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. (Do not round intermediate calculations and round your final answers to the nearest whole dollar amount. Loss amounts should be indicated with a minus sign.)
| (1) | |||
| Particulars | 2,021 | 2,022 | 2,023 |
| Billing during the year (cumulative) | 20,00,000 | 60,00,000 | 1,00,00,000 |
| Revenue (10000000 x 30% or 45% or 25%) | 30,00,000 | 45,00,000 | 25,00,000 |
| Cost incurred | 24,00,000 | 36,00,000 | 22,00,000 |
| Gross Profit | 6,00,000 | 9,00,000 | 3,00,000 |
| *It is assumed estimated revenue $ 1 crores | |||
| Working Notes: | 2,021 | 2,022 | 2,023 |
| (i) Cost incurred (cumulative) (a) | 24,00,000 | 60,00,000 | 82,00,000 |
| Estimated cost to be complete (b) | 56,00,000 | 20,00,000 | - |
| Total estimated cost at the end (c ) | 80,00,000 | 80,00,000 | 82,00,000 |
| Percentage of completion (a/c) | 30.00% | 75.00% | 100.00% |
| (2a) | |||
| 2021 | |||
| Cost | 24,00,000 | ||
| Gross Profit | 6,00,000 | ||
| Revenue | 30,00,000 | ||
| (2b) | |||
| 2022 | |||
| Cost | 36,00,000 | ||
| Gross Profit | 9,00,000 | ||
| Revenue | 45,00,000 | ||
| (2c) | |||
| 2023 | |||
| Cost | 22,00,000 | ||
| Gross Profit | 3,00,000 | ||
| Revenue | 25,00,000 | ||
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