On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,390,000. During 2021, costs of $2,130,000 were incurred with estimated costs of $4,130,000 yet to be incurred. Billings of $2,630,000 were sent, and cash collected was $2,380,000. In 2022, costs incurred were $2,630,000 with remaining costs estimated to be $3,795,000. 2022 billings were $2,880,000 and $2,605,000 cash was collected. The project was completed in 2023 after additional costs of $3,930,000 were incurred. The company's fiscal year-end is December 31. Arrow recognizes revenue over time according to percentage of completion. Required: 1. Compute the amount of revenue and gross profit or loss to be recognized in 2021, 2022, and 2023 using the percentage of completion method.
On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,390,000. During 2021, costs of $2,130,000 were incurred with estimated costs of $4,130,000 yet to be incurred. Billings of $2,630,000 were sent, and cash collected was $2,380,000. In 2022, costs incurred were $2,630,000 with remaining costs estimated to be $3,795,000. 2022 billings were $2,880,000 and $2,605,000 cash was collected. The project was completed in 2023 after additional costs of $3,930,000 were incurred. The company's fiscal year-end is December 31. Arrow recognizes revenue over time according to percentage of completion. Required: 1. Compute the amount of revenue and gross profit or loss to be recognized in 2021, 2022, and 2023 using the percentage of completion method.
Chapter1: Financial Statements And Business Decisions
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![**Arrow Construction Company: Contract Revenue Recognition Analysis**
On February 1, 2021, Arrow Construction Company initiated a three-year construction contract to build a bridge valued at $8,390,000. During 2021, costs incurred were $2,130,000 with additional estimated costs of $4,130,000 pending. Billings of $2,630,000 were issued, and $2,380,000 was collected as cash.
For 2022, costs incurred increased to $2,630,000, with remaining costs estimated at $3,795,000. The billings for 2022 amounted to $2,880,000, with cash collected at $2,605,000. The project reached completion in 2023 after incurring further costs of $3,930,000. Arrow adopts a fiscal year-end on December 31 and recognizes revenue over time based on the percentage of completion.
**Requirements:**
1. Compute the amount of revenue and gross profit or loss to be recognized in 2021, 2022, and 2023 using the percentage of completion method.
2.
- 2a. Prepare journal entries for 2021 to record transactions (credit "various accounts" for construction costs incurred).
- 2b. Prepare journal entries for 2022 for the recorded transactions as described.
3.
- 3a. Create a partial balance sheet to represent the project as of December 31, 2021.
- 3b. Develop a partial balance sheet for the presentation as of December 31, 2022.
**Instructions for Completion:**
Complete this activity by submitting your answers in the provided tabs: Req 1, Req 2A, Req 2B, Req 3A, and Req 3B.
**Calculation Notes:**
Compute the revenue and gross profit or loss for recognition in the years 2021, 2022, and 2023 based on the percentage of completion method. Intermediate calculations should not be rounded. Indicate any loss amounts with a minus sign and round final answers to the nearest dollar.
**Navigation:**
You can navigate through the question using the arrow buttons or directly selecting the page number.
[End of Transcription]](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9b584b46-60b7-4976-9b0d-60d7ece40ffb%2F96f22e61-239f-4e4d-beba-9396c74bbd28%2Fpvvxgyd_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Arrow Construction Company: Contract Revenue Recognition Analysis**
On February 1, 2021, Arrow Construction Company initiated a three-year construction contract to build a bridge valued at $8,390,000. During 2021, costs incurred were $2,130,000 with additional estimated costs of $4,130,000 pending. Billings of $2,630,000 were issued, and $2,380,000 was collected as cash.
For 2022, costs incurred increased to $2,630,000, with remaining costs estimated at $3,795,000. The billings for 2022 amounted to $2,880,000, with cash collected at $2,605,000. The project reached completion in 2023 after incurring further costs of $3,930,000. Arrow adopts a fiscal year-end on December 31 and recognizes revenue over time based on the percentage of completion.
**Requirements:**
1. Compute the amount of revenue and gross profit or loss to be recognized in 2021, 2022, and 2023 using the percentage of completion method.
2.
- 2a. Prepare journal entries for 2021 to record transactions (credit "various accounts" for construction costs incurred).
- 2b. Prepare journal entries for 2022 for the recorded transactions as described.
3.
- 3a. Create a partial balance sheet to represent the project as of December 31, 2021.
- 3b. Develop a partial balance sheet for the presentation as of December 31, 2022.
**Instructions for Completion:**
Complete this activity by submitting your answers in the provided tabs: Req 1, Req 2A, Req 2B, Req 3A, and Req 3B.
**Calculation Notes:**
Compute the revenue and gross profit or loss for recognition in the years 2021, 2022, and 2023 based on the percentage of completion method. Intermediate calculations should not be rounded. Indicate any loss amounts with a minus sign and round final answers to the nearest dollar.
**Navigation:**
You can navigate through the question using the arrow buttons or directly selecting the page number.
[End of Transcription]
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