On February 1, 2024, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,300,000. During 2024, costs of $2,100,000 were incurred with estimated costs of $4,100,000 yet to be incurred. Billings of $2,600,000 were sent, and cash collected was $2,350,000. In 2025, costs incurred were $2,600,000 with remaining costs estimated to be $3,750,000. 2025 billings were $2,850,000, and $2,575,000 cash was collected. The project was completed in 2026 after additional costs of $3,900,000 were incurred. The company's fiscal year-end is December 31. Arrow recognizes revenue over time according to percentage of completion. 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).
On February 1, 2024, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,300,000. During 2024, costs of $2,100,000 were incurred with estimated costs of $4,100,000 yet to be incurred. Billings of $2,600,000 were sent, and cash collected was $2,350,000. In 2025, costs incurred were $2,600,000 with remaining costs estimated to be $3,750,000. 2025 billings were $2,850,000, and $2,575,000 cash was collected. The project was completed in 2026 after additional costs of $3,900,000 were incurred. The company's fiscal year-end is December 31. Arrow recognizes revenue over time according to percentage of completion. 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).
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
$8,300,000. During 2024, costs of $2,100,000 were incurred with estimated costs of $4,100,000 yet to be incurred. Billings of
$2,600,000 were sent, and cash collected was $2,350,000.
In 2025, costs incurred were $2,600,000 with remaining costs estimated to be $3,750,000. 2025 billings were $2,850,000, and
$2,575,000 cash was collected. The project was completed in 2026 after additional costs of $3,900,000 were incurred. The
company's fiscal year-end is December 31. Arrow recognizes revenue over time according to percentage of completion.
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 2A
2024
2025
2026
Construction revenue
Construction expense
Gross profit (loss)
Calculate the amount of revenue and gross profit or loss to be recognized in each of the three years.
Note: Do not round intermediate calculations. Loss amounts should be indicated with a minus sign. Round your final answers to the nearest
whole dollar.
Construction revenue
Construction expense
Gross profit (loss)
Req 2B
Construction revenue
Construction expense
Gross profit (loss)
To date
To date
Req 3A
To date
Req 3B
Percentages of completion
2024
Recognized in prior years
2025
< Req 1
Recognized in prior years
2026
Recognized in prior years
Req 2A >
=
=
$
$
$
$
$
$
$
$
$
Recognized in 2024
Recognized in 2025
Recognized in 2026
0
0
0
0
0
0
0
0
0
0
0
0
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