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question problem 5 11 long term contract revenue recognition upon completion lo5 9 i 4277233

Question

Problem 5-11 Long-term contract; revenue recognition upon completion [LO5-9]

In 2016, 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 2018. Information related to the contract is as follows:

2016

2017

2018

  Cost incurred during the year

$

2,511,000

$

3,645,000

$

2,138,400

  Estimated costs to complete as of year-end

5,589,000

1,944,000

0

  Billings during the year

2,100,000

4,056,000

3,844,000

  Cash collections during the year

1,890,000

3,700,000

4,400,000

Westgate Construction uses the completed contract method of accounting for long-term construction contracts.

Required:

1.

Calculate the amount of revenue and gross profit (loss) to be recognized in each of the three years.(Loss amounts should be indicated with a minus sign.)

REVENUE                       2016    2017     2018

Gross proft (loss)

 

2-a.

In the journal below, complete the necessary journal entries for the year 2016 (credit “Various accounts” for construction costs incurred). (If no entry is required for a transaction/event, select “No journal entry required” in the first account field.)

·         1.

Record the construction costs.

·         2.

Record the progress billings.

·         3.

Record the cash collections.

·         4.

Record the gross profit.

·       

 

2-b.

In the journal below, complete the necessary journal entries for the year 2017 (credit “Various accounts” for construction costs incurred). (If no entry is required for a transaction/event, select “No journal entry required” in the first account field.)

         Record the construction costs.

·         2.

Record the progress billings.

·         3.

Record the cash collections.

·         4.

Record the gross profit.

2-c.

In the journal below, complete the necessary journal entries for the year 2018 (credit “Various accounts” for construction costs incurred). (If no entry is required for a transaction/event, select “No journal entry required” in the first account field.)

         Record the construction costs.

·         2.

Record the progress billings.

·         3.

Record the cash collections.

·         4.

Record the gross profit.

3.

Complete the information required below to prepare a partial balance sheet for 2016 and 2017 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. (Loss amounts should be indicated with a minus sign.)

2016

2017

2018

  Cost incurred during the year

$

2,410,000

$

3,805,000

$

3,210,000

  Estimated costs to complete as of year-end

5,610,000

3,110,000

0

 

                                                              2016 2017 2018

           REVENUE  

           GROSS PROFIT (LOSS

 

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. (Loss amounts should be indicated with a minus sign.)

2016

2017

2018

  Cost incurred during the year

$

2,410,000

$

3,805,000

$

3,915,000

  Estimated costs to complete as of year-end

5,610,000

4,110,000

0

 

 

                                                              2016 2017 2018

           REVENUE  

           GROSS PROFIT (LOSS

 

In 2016, 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 2018. Information related to the contract is as follows:

 

 

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