Problem 5 5 Percentage of completion method [LO5 5]
In 2013, 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 2015. Information related to the contract is as follows:
| 2013 | 2014 | 2015 | |||||||
| Cost incurred during the year | $ | 1,776,000 | $ | 3,330,000 | $ | 2,523,400 | |||
| Estimated costs to complete as of year end | 5,624,000 | 2,294,000 | 0 | ||||||
| Billings during the year | 1,400,000 | 3,706,000 | 4,894,000 | ||||||
| Cash collections during the year | 1,260,000 | 3,000,000 | 5,740,000 | ||||||
Westgate uses the percentage of completion method of accounting for long term construction contracts.
Required:
|
1. |
Calculate the amount of gross profit (loss) to be recognized in each of the three years. (Do not round intermediate calculations.) |
|
2013 2014 2015
Gross profit (loss)
2.1 In the journal below, complete the necessary journal entries for the year 2013 (credit various accounts for construction costs incurred). (If no entry is required for a particular transaction, select “No journal entry required” in the first account field. Do not round intermediate calculations.)
- Record construction costs.
- Record progress billings.
- Record cash collections.
- Record gross profit.
2.2 In the journal below, complete the necessary journal entries for the year 2014 (credit various accounts for construction costs incurred). (If no entry is required for a particular transaction, select “No journal entry required” in the first account field. Do not round intermediate calculations.)
- Record construction costs.
- Record progress billings.
- Record cash collections.
- Record gross profit.
|
2.3 |
In the journal below, complete the necessary journal entries for the year 2015 (credit various accounts for construction costs incurred). (If no entry is required for a particular transaction, select “No journal entry required” in the first account field. Do not round intermediate calculations.) |
|
- Record construction costs.
- Record progress billings.
- Record cash collections.
- Record gross profit.
3. Complete the information required below to prepare a partial balance sheet for 2013 and 2014 showing any items related to the contract. (Do not round intermediate calculations.)
2013 2014
Current assets:
4. Calculate the amount of 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.)
| 2013 | 2014 | 2015 | |||||||
| Costs incurred during the year | $ | 2,560,000 | $ | 3,880,000 | $ | 3,260,000 | |||
| Estimated costs to complete as of year end | 5,760,000 | 3,260,000 | 0 | ||||||
| 5. |
Calculate the amount of 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.) |
|||
| 2013 | 2014 | 2015 | |||||||
| Costs incurred during the year | $ | 2,560,000 | $ | 3,880,000 | $ | 4,140,000 | |||
| Estimated costs to complete as of year end | 5,760,000 | 4,260,000 | 0 | ||||||