On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to b $8,000,000. During 2018, costs of $2,000,000 were incurred, with estimated costs of $4,000,000 yet t $2,500,000 were sent, and cash collected was $2,250,000. In 2019, costs incurred were $2,500,000 with remaining costs estimated to be $3,600,000. 2019 billing $2,475,000 cash was collected. The project was completed in 2020 after additional costs of $3,800,00 company's fiscal year-end is December 31. This project does not qualify for revenue recognition over ti 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 2018 to record the transactions described (credit "various accounts" for 2b. Prepare journal entries for 2019 to record the transactions described (credit "various accounts" for 3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2018. 3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2019.
On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to b $8,000,000. During 2018, costs of $2,000,000 were incurred, with estimated costs of $4,000,000 yet t $2,500,000 were sent, and cash collected was $2,250,000. In 2019, costs incurred were $2,500,000 with remaining costs estimated to be $3,600,000. 2019 billing $2,475,000 cash was collected. The project was completed in 2020 after additional costs of $3,800,00 company's fiscal year-end is December 31. This project does not qualify for revenue recognition over ti 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 2018 to record the transactions described (credit "various accounts" for 2b. Prepare journal entries for 2019 to record the transactions described (credit "various accounts" for 3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2018. 3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2019.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of
$8,000,000. During 2018, costs of $2,000,000 were incurred, with estimated costs of $4,000,000 yet to be incurred. Billings of
$2,500,000 were sent, and cash collected was $2,250,000.
In 2019, costs incurred were $2,500,000 with remaining costs estimated to be $3,600,000. 2019 billings were $2,750,000, and
$2,475,000 cash was collected. The project was completed in 2020 after additional costs of $3,800,000 were incurred. The
company's 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 2018 to record the transactions described (credit "various accounts" for construction costs incurred).
2b. Prepare journal entries for 2019 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, 2018.
3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2019.
X Answer is not complete.
Complete this question by entering your answers in the tabs below.
Req 1
Req 2A
Req 2B
Req 3A
Reg 3B
Calculate the amount of revenue and gross profit or loss to be recognized in each of the three years. (Loss amounts should be
indicated with a minus sign.)
Gross profit
(loss)
recognized
Revenue
Year
recognized
2018
$
(666,667) X
2019
766,667 X
2020
(200,000)
Total
$
$
(100,000)
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