Question
In 2024, 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
In 2024, 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 2026. Information related to the contract is as follows:
| 2024 | 2025 | 2026 | |
|---|---|---|---|
| Cost incurred during the year | $ 2,739,000 | $ 3,735,000 | $ 2,008,600 |
| Estimated costs to complete as of year-end | 5,561,000 | 1,826,000 | 0 |
| Billings during the year | 2,300,000 | 4,174,000 | 3,526,000 |
| Cash collections during the year | 2,100,000 | 3,900,000 | 4,000,000 |
Assume that Westgate Constructions contract with Santa Clara County does not qualify for revenue recognition over time.
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 2024 (credit Cash, Materials, etc. for construction costs incurred).
2-b. In the journal below, complete the necessary journal entries for the year 2025 (credit Cash, Materials, etc. for construction costs incurred).
2-c. In the journal below, complete the necessary journal entries for the year 2026 (credit Cash, Materials, etc. for construction costs incurred).
3. Complete the information required below to prepare a partial balance sheet for 2024 and 2025 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.
| 2024 | 2025 | 2026 | |
|---|---|---|---|
| Cost incurred during the year | $ 2,430,000 | $ 3,815,000 | $ 3,230,000 |
| Estimated costs to complete as of year-end | 5,630,000 | 3,130,000 | 0 |
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.
| 2024 | 2025 | 2026 | |
|---|---|---|---|
| Cost incurred during the year | $ 2,430,000 | $ 3,815,000 | $ 3,945,000 |
| Estimated costs to complete as of year-end | 5,630,000 | 4,130,000 | 0 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
How To Audit The Process Based QMS
Authors: Arter, Dennis R., Cianfrani, Charles A, And West, John E., 'Jack'
2nd Edition
