On February 1, 2018, Arrow Construction Company entered into athree-year construction contract to build...

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Accounting

On February 1, 2018, Arrow Construction Company entered into athree-year construction contract to build a bridge for a price of$8,500,000. During 2018, costs of $2,200,000 were incurred, withestimated costs of $4,200,000 yet to be incurred. Billings of$2,740,000 were sent, and cash collected was $2,450,000.

In 2019, costs incurred were $2,740,000 with remaining costsestimated to be $3,900,000. 2019 billings were $2,990,000, and$2,675,000 cash was collected. The project was completed in 2020after additional costs of $4,000,000 were incurred. The company’sfiscal year-end is December 31. This project does not qualify forrevenue recognition over time.

Required:
1. Calculate the amount of revenue and grossprofit or loss to be recognized in each of the three years.
2a. Prepare journal entries for 2018 to record thetransactions described (credit "various accounts" for constructioncosts incurred).
2b. Prepare journal entries for 2019 to record thetransactions described (credit "various accounts" for constructioncosts incurred).
3a. Prepare a partial balance sheet to show thepresentation of the project as of December 31, 2018.
3b. Prepare a partial balance sheet to show thepresentation of the project as of December 31, 2019.

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Solution 1 Computation of of completion revenue recognition and Gross Profit Arrow Construction Company Year Actual cost incurred A Total cost incurred till date B Total estimated Cost C of completion D BC Contract Price E Total Revenue to be recoganized F E D Revenue for current period G Gross Profit H 2018 2200000 2200000 6400000 3438 8500000 2921875 2921875 721875 2921875 2200000 2019 2740000 4940000 8840000 See Answer

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In: AccountingOn February 1, 2018, Arrow Construction Company entered into athree-year construction contract to build a...On February 1, 2018, Arrow Construction Company entered into athree-year construction contract to build a bridge for a price of$8,500,000. During 2018, costs of $2,200,000 were incurred, withestimated costs of $4,200,000 yet to be incurred. Billings of$2,740,000 were sent, and cash collected was $2,450,000.In 2019, costs incurred were $2,740,000 with remaining costsestimated to be $3,900,000. 2019 billings were $2,990,000, and$2,675,000 cash was collected. The project was completed in 2020after additional costs of $4,000,000 were incurred. The company’sfiscal year-end is December 31. This project does not qualify forrevenue recognition over time.Required:1. Calculate the amount of revenue and grossprofit or loss to be recognized in each of the three years.2a. Prepare journal entries for 2018 to record thetransactions described (credit "various accounts" for constructioncosts incurred).2b. Prepare journal entries for 2019 to record thetransactions described (credit "various accounts" for constructioncosts incurred).3a. Prepare a partial balance sheet to show thepresentation of the project as of December 31, 2018.3b. Prepare a partial balance sheet to show thepresentation of the project as of December 31, 2019.