On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge

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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. 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.

2. Prepare journal entries for 2018 and 2019 to record the transactions described (credit "various accounts" for construction costs incurred).

3. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2018 and 2019.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
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Intermediate Accounting

ISBN: 9781259722660

9th Edition

Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas

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