On February 1, 2024, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,075,000. During 2024, costs of $2,030,000 were incurred, with estimated costs of $4,030,000 yet to be incurred. Billings of $2,536,000 were sent, and cash collected was $2.280,000. In 2025, costs incurred were $2,536,000 with remaining costs estimated to be $3,645,000. 2025 billings were $2,786,000, and $2,505,000 cash was collected. The project was completed in 2026 after additional costs of $3,830,000 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 2024 to record the transactions described (credit "Cash, Materials, etc." for construction costs incurred). 2b. Prepare journal entries for 2025 to record the transactions described (credit "Cash, Materials, etc." for construction costs incurred). 3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2024. 3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2025.
On February 1, 2024, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,075,000. During 2024, costs of $2,030,000 were incurred, with estimated costs of $4,030,000 yet to be incurred. Billings of $2,536,000 were sent, and cash collected was $2.280,000. In 2025, costs incurred were $2,536,000 with remaining costs estimated to be $3,645,000. 2025 billings were $2,786,000, and $2,505,000 cash was collected. The project was completed in 2026 after additional costs of $3,830,000 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 2024 to record the transactions described (credit "Cash, Materials, etc." for construction costs incurred). 2b. Prepare journal entries for 2025 to record the transactions described (credit "Cash, Materials, etc." for construction costs incurred). 3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2024. 3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2025.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On February 1, 2024, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of
$8,075,000. During 2024, costs of $2,030,000 were incurred, with estimated costs of $4,030,000 yet to be incurred. Billings of
$2,536,000 were sent, and cash collected was $2,280,000.
In 2025, costs incurred were $2,536,000 with remaining costs estimated to be $3,645,000. 2025 billings were $2,786,000, and
$2,505,000 cash was collected. The project was completed in 2026 after additional costs of $3,830,000 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 2024 to record the transactions described (credit "Cash, Materials, etc." for construction costs incurred).
2b. Prepare journal entries for 2025 to record the transactions described (credit "Cash, Materials, etc." for construction costs incurred).
3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2024.
3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2025.
Complete this question by entering your answers in the tabs below.
Req 1
Req 3A
Req 38
Calculate the amount of revenue and gross profit or loss to be recognized in each of the three years.
Note: Loss amounts should be indicated with a minus sign. Leave no cells blank.
Year
2024
2025
2026
Total
Reg 2A
Revenue
recognized
$
Req 28
Gross profit (loss)
recognized
0 $
0
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