Exercise 5-20 Long-term contract; revenue recognition upon project completion; loss projected on entire project [LO5-8, 5-9] On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,025,000. During 2018, costs of $2,010,000 were incurred, with estimated costs of $4,010,000 yet to be incurred. Billings of $2,512,000 were sent, and cash collected was $2,260,000.

In 2019, costs incurred were $2,512,000 with remaining costs estimated to be $3,615,000. 2019 billings were $2,762,000, and $2,485,000 cash was collected. The project was completed in 2020 after additional costs of $3,810,000 were incurred. The companys 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.

Year	Revenue recognized	Gross profit (loss) recognized
2018	$0
2019	0
2020	8,025,000
Total	$8,025,000

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

No	Year	General Journal	Debit	Credit
1	2019	Construction in progress	2,512,000
		Various accounts		2,512,000
2	2019	Accounts receivable	2,762,000
		Billings on construction contract		2,762,000
3	2019	Cash	2,485,000
		Accounts receivable		2,485,000
4	??? Record the expected loss	????

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

Balance Sheet
At December 31, 2018
Current assets:
Accounts receivable	$252,000
Construction in progress	2,010,000
Current liabilities:

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

Balance Sheet
At December 31, 2019
Current assets:
Accounts receivable
Construction in progress
Current liabilities: