Un February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for MR Inc for a price of $20 million. During 2018, costs of $4 million were incurred with estimated costs of $12 million yet to be incurred. In 2019, costs incurred were $8 million with remaining costs estimated to be $5 million. The project was completed in 2020 after additional costs of $5.5 million were incurred. The company's fiscal year-end is December 31. Arrow recognizes revenue over time according to percentage-of-completion, and the bridge under construction is deemed to be under the control of MR Inc throughout the construction period. Compute the amount of revenue and gross profit or loss to be recognized by Arrow in 2018, 2019, and 2020.
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- On March 1, 2019, Elkhart enters into a new contract to build a specialized warehouse for 7 million. The promise to transfer the warehouse is determined to be a performance obligation. The contract states that if the warehouse is usable by November 30, 2019, Elkhart will receive a bonus of 600,000. For every week after November 30 that the warehouse is not usable, the bonus will decrease by 150,000. Elkhart provides the following completion schedule: Required: 1. Assume that Elkhart uses the expected value approach. What amount should Elkhart use for the transaction price? 2. Assume that Elkhart uses the most likely amount approach. What amount should Elkhart use for the transaction price? 3. Next Level What is the purpose of assessing whether a constraint on the variable consideration exists?On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,360,000. During 2018, costs of $2,120,000 were incurred with estimated costs of $4,120,000 yet to be incurred. Billings of $2,620,000 were sent, and cash collected was $2,370,000. In 2019, costs incurred were $2,620,000 with remaining costs estimated to be $3,780,000. 2019 billings were $2,870,000 and $2,595,000 cash was collected. The project was completed in 2020 after additional costs of $3,920,000 were incurred. The company's fiscal year-end is December 31. Arrow recognizes revenue over time according to percentage of completion. Required: 1. Prepare journal entries to recognize revenue for 2018, 2019 and 2020. 1On 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…
- 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. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2018.2. 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 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…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…
- On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to builda 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 gross profit or loss to be recognized in each of the three years.2. Prepare journal entries for 2018 and 2019 to record the transactions described (credit “various accounts” forconstruction costs incurred).3. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2018…On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,360,000. During 2021, costs of $2,120,000 were incurred with estimated costs of $4,120,000 yet to be incurred. Billings of $2,620,000 were sent, and cash collected was $2,370,000. In 2022, costs incurred were $2,620,000 with remaining costs estimated to be $3,780,000. 2022 billings were $2,870,000 and $2,595,000 cash was collected. The project was completed in 2023 after additional costs of $3,920,000 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.2a. Prepare journal entries for 2021 to record the transactions described (credit "various accounts" for construction costs incurred).2b. Prepare journal entries for 2022 to…On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,000,000. During 2021, 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 2022, costs incurred were $2,500,000 with remaining costs estimated to be $3,600,000. 2022 billings were $2,750,000, and $2,475,000 cash was collected. The project was completed in 2023 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 2021 to record the transactions described (credit "various accounts" for construction costs incurred). 2b. Prepare journal entries for 2022 to record the transactions described (credit…
- On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,075,000. During 2021, 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 2022, costs incurred were $2,536,000 with remaining costs estimated to be $3,645,000. 2022 billings were $2,786,000, and $2,505,000 cash was collected. The project was completed in 2023 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 2021 to record the transactions described (credit "various accounts" for construction costs incurred).2b. Prepare journal entries for 2022 to record the transactions described (credit…On February 1, 2024, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,375,000. During 2024, costs of $2,150,000 were incurred, with estimated costs of $4,150,000 yet to be incurred. Billings of $2,680,000 were sent, and cash collected was $2,400,000. In 2025, costs incurred were $2,680,000 with remaining costs estimated to be $3,825,000. 2025 billings were $2,930,000, and $2,625,000 cash was collected. The project was completed in 2026 after additional costs of $3,950,000 were incurred. The company’s fiscal year-end is December 31. This project does not qualify for revenue recognition over time. Calculate the amount of revenue and gross profit or loss to be recognized in each of the three years.On February 1, 2024, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,375,000. During 2024, costs of $2,150,000 were incurred, with estimated costs of $4,150,000 yet to be incurred. Billings of $2,680,000 were sent, and cash collected was $2,400,000. In 2025, costs incurred were $2,680,000 with remaining costs estimated to be $3,825,000. 2025 billings were $2,930,000, and $2,625,000 cash was collected. The project was completed in 2026 after additional costs of $3,950,000 were incurred. The company’s fiscal year-end is December 31. This project does not qualify for revenue recognition over time. . Prepare journal entries for 2024 and 2025 to record the transactions described (credit "Cash, Materials, etc." for construction costs incurred).