Exercise 6-22 (Algo) Long-term contract; revenue recognition upon project completion; loss projected on entire project [LO6-8, 6-9]

On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,425,000. During 2021, costs of $2,170,000 were incurred, with estimated costs of $4,170,000 yet to be incurred. Billings of $2,704,000 were sent, and cash collected was $2,420,000. In 2022, costs incurred were $2,704,000 with remaining costs estimated to be $3,855,000. 2022 billings were $2,954,000, and $2,645,000 cash was collected. The project was completed in 2023 after additional costs of $3,970,000 were incurred. The companys fiscal year-end is December 31. This project does not qualify for revenue recognition over time. Required: 1. Calculate the amount of revenue and gross profit or loss to be recognized in each of the three years. 2a. Prepare journal entries for 2021 to record the transactions described (credit "various accounts" for construction costs incurred). 2b. Prepare journal entries for 2022 to record the transactions described (credit "various accounts" for construction costs incurred). 3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2021. 3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2022.

Year	Revenue recognized	Gross profit (loss) recognized
2021
2022
2023
Total

repare journal entries for 2021 to record the transactions described (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.)

No	Year	General Journal	Debit	Credit
1	2021	Construction in progressselected answer correct	not attempted	not attempted
		Various accountsselected answer correct	not attempted	not attempted

Prepare journal entries for 2022 to record the transactions described (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.)

No	Year	General Journal	Debit	Credit

Prepare a partial balance sheet to show the presentation of the project as of December 31, 2021. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)

	Balance Sheet At December 31, 2021 Current assets: not attempted not attempted not attempted not attempted not attempted not attempted not attempted not attempted Current liabilities: not attempted not attempted not attempted not attempted not attempted not attempted

Prepare a partial balance sheet to show the presentation of the project as of December 31, 2022. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.)

	Balance Sheet At December 31, 2022 Current assets: not attempted not attempted not attempted not attempted not attempted not attempted not attempted not attempted Current liabilities: not attempted not attempted not attempted not attempted not attempted not attempted