Hello,

Can you please help with this problem and give an explanation for the correct answer. Thank you.

Curtiss Construction Company, Inc., entered into a fixed-price contract with Axelrod Associates on July 1, 2021, to construct a four-story office building. At that time, Curtiss estimated that it would take between two and three years to complete the project. The total contract price for construction of the building is $5,140,000. Curtiss concludes that the contract does not qualify for revenue recognition over time. The building was completed on December 31, 2023. Estimated percentage of completion, accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Axelrod under the contract were as follows:

	At 12-31-2021				At 12-31-2022				At 12-31-2023
Percentage of completion		10	%			60	%			100	%
Costs incurred to date	$	378,000			$	3,318,000			$	5,599,000
Estimated costs to complete		3,402,000				2,212,000				0
Billings to Axelrod, to date		739,000				2,550,000				5,140,000

Required: 1. Compute gross profit or loss to be recognized as a result of this contract for each of the three years. 2. Assuming Curtiss recognizes revenue over time according to percentage of completion, compute gross profit or loss to be recognized in each of the three years. 3. Assuming Curtiss recognizes revenue over time according to percentage of completion, compute the amount to be shown in the balance sheet at the end of 2021 and 2022 as either cost in excess of billings or billings in excess of costs.

Complete this question by entering your answers in the tabs below. Req 1 and 2 Reg 3 1. Compute gross profit or loss to be recognized as a result of this contract for each of the three years. 2. Assuming Curtiss recognizes revenue over time according to percentage of completion, compute gross profit or loss to be recognized in each of the three years. (Leave no cells blank - be certain to enter "0" wherever required. Loss amounts should be indicated with a minus sign.) Show less Year 2021 2022 2023 Total project profit (loss) Req 1 Gross Profit (Loss) Recognized ("Upon Completion") 0 0 5,140,000 $ 5,140,000 Req2 Gross Profit (Loss) Recognized ("Over Time") $ 136,000 $ (526,000) $ (69,000) $ (459,000) Req 1 and 2 Req3 Assuming Curtiss recognizes revenue over time according to percentage of completion, compute the amount to be shown in the balance sheet at the end of 2021 and 2022 as either cost in excess of billings or billings in excess of costs. 2021 2022 Balance Sheet (Partial) Current assets: Costs less loss in excess of billings $ 0 $ 378,000 Current liabilities: Billings in excess of costs and profit $ $ 225,000 225,000 $ $ 378,000 Complete this question by entering your answers in the tabs below. Req 1 and 2 Reg 3 1. Compute gross profit or loss to be recognized as a result of this contract for each of the three years. 2. Assuming Curtiss recognizes revenue over time according to percentage of completion, compute gross profit or loss to be recognized in each of the three years. (Leave no cells blank - be certain to enter "0" wherever required. Loss amounts should be indicated with a minus sign.) Show less Year 2021 2022 2023 Total project profit (loss) Req 1 Gross Profit (Loss) Recognized ("Upon Completion") 0 0 5,140,000 $ 5,140,000 Req2 Gross Profit (Loss) Recognized ("Over Time") $ 136,000 $ (526,000) $ (69,000) $ (459,000) Req 1 and 2 Req3 Assuming Curtiss recognizes revenue over time according to percentage of completion, compute the amount to be shown in the balance sheet at the end of 2021 and 2022 as either cost in excess of billings or billings in excess of costs. 2021 2022 Balance Sheet (Partial) Current assets: Costs less loss in excess of billings $ 0 $ 378,000 Current liabilities: Billings in excess of costs and profit $ $ 225,000 225,000 $ $ 378,000