In 2011, 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 2013. Information related to the contract is as follows:
2011 2012 2013
Cost incurred during the year $ 2,400,000 $ 3,600,000 $ 2,200,000
Estimated costs to complete as of year-end 5,600,000 2,000,000 0
Billings during the year 2,000,000 4,000,000 4,000,000
Cash collections during the year 1,800,000 3,600,000 4,600,000
Westgate uses the percentage-of-completion method of accounting for long-term construction contracts.
Required:
(1) Calculate the amount of gross profit to be recognized in each of the three years.
(2) In the journal below, complete the necessary journal entries for each of the years (credit various accounts for construction costs incurred).