Question - 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:
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2013
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2014
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2015
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Cost incurred during the year
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$1,584,000
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$3,240,000
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$2,613,600
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|
Estimated costs to complete as of year-end
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5,616,000
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2,376,000
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0
|
|
Billings during the year
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1,200,000
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3,624,000
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5,176,000
|
|
Cash collections during the year
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1,080,000
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2,800,000
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6,120,000
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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.
2. In the journal below, complete the necessary journal entries for the year 2013 (credit various accounts for construction costs incurred).