Question

Award 2.00 points Exercise 5-19 Long-term 6.19 Long-term contract, revenue recognition over time, loss projected on entire project ILO5-91 do g s of Construction Company entered in On February a threeyear construction contrat a of $2.200.000 were incurred with estimated cost of $4 200.000 yet is bein 2 450 000 0 000 w esent and cash cobacted $2.700 000 with remaining cost estimated to be 53.000.000 2019 In 2018, concurrer a proct was completed in 2020 aterational costs of 14 000 000 w and is December 31. Arrow recognizes revenue over time according to percentage of 120 000 in the company's Required: amount of revenue and gross profit or loss to be recognized in 2018, 2019 and 2020 using the percentage completion method? bunal entries for 2018 to record the transactions described (credit various accounts for construction costs incura P arumal entries for 2019 to record the transactions described (credit various accounts for construction costs incurred P ara partial balance sheet to show the presentation of the project as of December 31, 2018 3h. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2019 Complete this question by entering your answers in the tabs below. Rg 1 Reg 2A Req 28 Reg JA Reg 38 Prepare a partial balance sheet to show the presentation of the project as of December 31, 2019. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.) Balance Sheet (Partial) At December 31, 2019 Current assets Accounts receivable Current Bilings in excess of costs less loss s 950.000 & RegJA Req30 > v 03_05_2018_0C_CS-120751.09_27_2018_0C_CS-140749 References Worksheet Difficulty: 2 Medium n.com products Single PrintView single QuestionNo 9.&postSubmission View 13252712403141363601

Answer 1

Solution 1:

Computation of % of completion, revenue recognition and Gross Profit - Arrow Construction Company
Year	Actual cost incurred (A)	Total cost incurred till date (B)	Total estimated Cost ( C )	% of completion (D) (B/C)	Contract Price (E)	Total Revenue to be recoganized (F) (E * D)	Revenue for current period (G)	Gross Profit (H)
2018	$2,200,000	$2,200,000	$6,400,000	34.38%	$8,600,000	$2,956,250	$2,956,250	$756,250	$2,956,250 - $2,200,000
2019	$2,700,000	$4,900,000	$8,800,000	55.68%	$8,600,000	$4,788,636	$1,832,386	-$956,250	$8,600,000 - $8,800,000 - $756,250
2020	$4,000,000	$8,900,000	$8,900,000	100.00%	$8,600,000	$8,600,000	$3,811,364	-$100,000	$8,600,000 - $8,900,000 - $756,250 + $956,250

Solution 2a:

Journal Entries - Arrow Construction Company - 2018
Event	Particulars	Debit	Credit
1	Construction in Progress Dr	$2,200,000.00
	To Various Accounts		$2,200,000.00
	(To record construction cost incurred)
2	Accounts receivables Dr	$2,700,000.00
	To Billings on construction contract		$2,700,000.00
	(To record progress billings)
3	Cash Dr	$2,450,000.00
	To Accounts receivables		$2,450,000.00
	(To record collection from customer)
4	Construction in Progress Dr	$756,250.00
	Cost of construction Dr	$2,200,000.00
	To Revenue from long term contracts		$2,956,250.00
	(To record revenue and gross profit)

Solution 2b:

Journal Entries - Arrow Construction Company - 2019
Event	Particulars	Debit	Credit
1	Construction in Progress Dr	$2,700,000.00
	To Various Accounts		$2,700,000.00
	(To record construction cost incurred)
2	Accounts receivables Dr	$2,950,000.00
	To Billings on construction contract		$2,950,000.00
	(To record progress billings)
3	Cash Dr	$2,675,000.00
	To Accounts receivables		$2,675,000.00
	(To record collection from customer)
4	Cost of construction Dr	$2,788,636.00
	To Construction in Progress		$956,250.00
	To Revenue from long term contracts		$1,832,386.00
	(To record revenue and gross profit)

solution 3a & 3b:

Arrow construction company
Balance Sheet (Partial)
As on December 31
Particulars	2018	2019
Assets:
Current Assets:
Accounts Receivables 2018 - $2,700,000 - $2,450,000 2019 - $250,000 + $2,950,000 - $2,675,000	$250,000.00	$525,000.00
Cost and Profit in excess of billing 2018 - $2,956,250 - $2,700,000	$256,250.00
Liabilities and stockholder's equity:
Current liabilities:
Billings in excess of costs and profits ($2,950,000 - $2,700,000 + $956,250 - $256,250)		$950,000.00