Question

Can you explain how you came to your answers. Just the answer does me no good. Thank you so much!

On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,400,000. During 2018, costs of $2,160,000 were incurred, with estimated costs of $4,160,000 yet to be incurred. Billings of $2,692,000 were sent, and cash collected was $2,410,000. In 2019, costs incurred were $2,692,000 with remaining costs estimated to be $3,840,000. 2019 billings were $2,942,000, and $2,635,000 cash was collected. The project was completed in 2020 after additional costs of $3,960,000 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 "various accounts" for construction costs incurred). 3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2018. 3b. 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. Reg 1 Req 2A Req 2B Req ЗА Req 3B Calculate the amount of revenue and gross profit or loss to be recognized in each of the three years. (Loss amounts should be indicated with a minus sign.) Year Revenue recognized Gross profit (loss) recognized 2018 2019 2020 8,400,000 Total $ 8,400,000 S 0

Answer 1

1) Year 2018 2019 2020 Total Revenue Gross Profit Recognized (Loss) Recog. $2,870,886 $710,886 $1,818,115 -$873,885 $3,710,999 $249,001 $8,400,000 -$412,000 Workings: Percentage of Completion Choose Denominator Total estimated cost to date $6,320,000 $8,692,000 $8,812,000 Choose Numerator Cost incurred to date $2,160,000 $4,852,000 $8,812,000 2018 2019 2020 % complete to date % complete to date 34.1772% 55.8214% 100.0000% [$2160000 / $6320000] [$4852000 / $8692000] ($8812000 / $8812000] NOTE: Total estimated cost to date 2018 = $2160000 + $4160000 = $6320000; Cost incurred to date for 2019 = $2160000 + $2692000 = $4852000; Total estimated cost to date 2019 = $4852000+ $3840000 = $8692000; Cost incurred to date for 2020 = $4852000 + $3960000 = $8812000. Therefore,

Construction Revenue Construction Expense Gross Profit (Loss) [$8400000 x 34.1772%] 2018 Recognized in Prior year $0 $0 $0 To Date $2,870,886 $2,160,000 $710,886 Recognized in 2018 $2,870,886 $2,160,000 $710,886 [$2870886 - $2160000] Construction Revenue Construction Expense Gross Profit (Loss) To Date $4,689,001 $4,852,000 $162,999 2019 Recognized in Prior year $2,870,886 $2,160,000 $710,886 Recognized in 2019 $1,818,115 $2,692,000 -$873,885 [To Date = $8400000 x 55.8214%] [To Date = $2160000 + $2692000] [Gross Profit (Loss) = $1818115 - $2692000] Construction Revenue Construction Expense Gross Profit (Loss) To Date $8,400,000 $8,812,000 $412,000 2020 Recognized in Prior year $4,689,001 $4,852,000 -$162,999 Recognized in 2020 $3,710,999 $3,960,000 -$249,001 [To Date = $8400000 x 100%] [To Date = $4852000 + $3960000] [Gross Profit (Loss) = $3710999 - $3960000]

2) a) 2018 Debit Credit b) 2019 Debit Credit Account Titles $2,160,000 $2,692,000 [Cost incurred during the year] Construction in progress Various Accounts (Materials, Labor, Etc.) (To record construction costs) $2,160,000 $2,692,000 $2,692,000 $2,942,000 [Billings during the year] Accounts recievable Billings on construction contract (To record progress billings) $2,692,000 $2,942,000 $2,410,000 $2,635,000 [Given] Cash Accounts receivable (To record cash collections) $2,410,000 $2,635,000 $2,692,000 $2,160,000 $710,886 [Cost incurred during the year] $873,885 [Gross profit (Debit) or loss (Credit) for the year as in Part-1] $1,818,115 [Revenue of respective years] $2,870,886 Cost of construction Construction in progress Revenue from long-term contracts (To record gross profit or loss) Billings on construction contract Construction in progress (To close all accounts) No Entry No Entry [Contract not yet completed and so no entry in 2018 & 2019]

3) Balance Sheet (Partial) a) 2018 b) 2019 Current Assets: $282,000 Accounts Receivable Construction in Process Less: Billings Costs and profit in excess of billings $2,870,886 ($2,692,000) $589,000 [2018 = $2692000-$2410000=$282000; 2019=$282000 + ($2942000 - $2635000)=$589000] [Revenue recognized for the year] [Bills raised during the year] $178,886 Current Liabilities: Billings Less: Construction in Process Billings in excess of costs less loss $5,634,000 ($4,689,001) [Cumulative Billings till date --> For 2019-$2692000+$2942000=$5634000] (Cumulative Revenue till date --> For 2019 = $2870886+$1818115=$4689001] $944,999