Crane Construction Inc., which has a calendar year end, has entered into a non-cancellable fixed price contract for $2.9 million beginning September 1, 2020, to build a road for a municipality. It has been estimated that the road construction will be complete by June 2022. The following data pertain to the construction period.

		2020		2021		2022
Costs to date		$848,000		$1,871,250		$2,428,000
Estimated costs to complete		1,802,000		623,750		0
Progress billings to date (non-refundable)		890,000		2,378,000		2,900,000
Cash collected to date		748,000		2,271,000		2,900,000

Using the percentage-of-completion method, calculate the estimated gross profit that would be recognized during each year of the construction period.

CRANE CONSTRUCTION INC.
STATEMENT OF GROSS PROFIT
	2020	2021	2022
Gross profit	$80,000	$223,750	$168,250

Using the percentage-of-completion method, prepare the journal entries for 2020 and 2021. (Use Materials, Cash, Payables for costs incurred to date.)

For the Year 2020:

Contract Asset/Liability	848000
Materials, Cash, Payables		848000
(To record cost of Construction)
Accounts Receivable	890000
Contract Asset/Liability		890000
(To record Progress billings)
Cash	748000
Accounts Receivable		748000
(To record collections)
Contract Asset/Liability	928000
Revenue from Long-Term Contracts		928000
(To record revenues)
Construction Expenses	848000
Contract Asset/Liability		848000
(To record construction expenses)

Same table for year 2021:

Contract Asset/Liability	1023250
Materials, Cash, Payables		1023250
(To record cost of Construction)
Accounts Receivable	1488000
Contract Asset/Liability		1488000
(To record Progress billings)
Cash	1523000
Accounts Receivable		1523000
(To record collections)
Contract Asset/Liability	1247000
Revenue from Long-Term Contracts		1247000
(To record revenues)
Construction Expenses	1023250
Contract Asset/Liability		1023250
(To record construction expenses)

Using the percentage-of-completion method, what is the balance in the Contract Asset/Liability account at December 31, 2020 and 2021?

Balance in the Contract Asset/Liability account

December 31, 2020	December 31, 2021
38,000