Reference no: EM133002289
On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,510,000. During 2021, costs of $2,170,000 were incurred with estimated costs of $4,170,000 yet to be incurred. Billings of $2,670,000 were sent, and cash collected was $2,420,000.
In 2022, costs incurred were $2,670,000 with remaining costs estimated to be $3,855,000. 2022 billings were $2,920,000 and $2,645,000 cash was collected. The project was completed in 2023 after additional costs of $3,970,000 were incurred. The company's fiscal year-end is December 31. Arrow recognizes revenue over time according to percentage of completion.
Required:
Problem 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.
Problem 2a. Prepare journal entries for 2021 to record the transactions described (credit "various accounts" for construction costs incurred).
Problem 2b. Prepare journal entries for 2022 to record the transactions described (credit "various accounts" for construction costs incurred).
Problem 3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2021.
Problem 3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2022.
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