Question
n 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
n 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 | $ 1,976,000 | $ 3,420,000 | $ 2,424,400 |
| Estimated costs to complete as of year-end | 5,624,000 | 2,204,000 | 0 |
| Billings during the year | 1,600,000 | 3,796,000 | 4,604,000 |
| Cash collections during the year | 1,400,000 | 3,200,000 | 5,400,000 |
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 | $ 2,540,000 | $ 3,870,000 | $ 3,240,000 |
| Estimated costs to complete as of year-end | 5,740,000 | 3,240,000 | 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 | $ 2,540,000 | $ 3,870,000 | $ 4,110,000 |
| Estimated costs to complete as of year-end | 5,740,000 | 4,240,000 | 0 |
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Auditing Assurance And Risk
Authors: W. Robert Knechel, Steve Salterio, Brian Ballou
2rd Edition
0324022131, 978-0324022131
