Question

262020 10. Anard 2.00 points 20 Long-term contract; revenue recognition upon project completion loss projected on entire Exercise 5 project |LOS-8,5-9) Arrow Construction Company entered into a three-year construction On February 10 costs of $2.170.000 were incurred, with estimated costs of 4170 000 yet to be incurred B.ings of to b e a bridge for a price of 704000 were sent and cash collected was 32,420.000 we were $2.704,000 with remaining costs mased to be $3.855 000. 2019 ings were $2,054.000, and cois a s collected. The project was completed in 2020 for additional costs of $3970 000 were incurred. The company's con December 31. This project does not quality for revenue recognition over time fiscal year-endis Decor 52.645.000 cash was collected. The project was comple Required: ut of revenue and gross profit or loss to be recognized in each of the three years 1. Calculate inerentes for 2018 to record the transactions described credit various accounts for construction costs incurred) Prepare mal entries for 2019 to record the transactions described credit Various accounts for construction costs incurred) adul balance sheet to show the presentation of the project as of December 31, 2018 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 28 Reg 3A Reg 3B Prepare a partial balance sheet to show the presentation of the project as of December 31, 2019. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.) Balance Sheet At December 31, 2019 Current assets: Accounts receivable $ 593,000 Current Rabilities: Billings in excess of costs loss loss $ 1088,000 ( RogA Req30 > References

Answer 1

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Arrow Construction Company
Ans to 1	Calculation of Gross Profit
Particulars	2018	2019	2020	Note
Contract Price	8,425,000	8,425,000	8,425,000	A
Cost Incurred during the year	2,170,000	2,704,000.00	3,970,000	B
Estimated cost to complete	4,170,000	3,855,000	-	C
Cost Incurred to date	2,170,000	4,874,000	8,844,000	D
(Sum total of the cost incurred during the year)
Estimated total cost	6,340,000	8,729,000	8,844,000	E=C+D
Percentage complete	34.23%	55.84%	100.00%	F=D/E
(Cost Incurred to date/Estimated total cost)
Revenue to be recognized	2,883,636	1,820,620	3,720,744	G
(Contract Price*Percentage complete)- revenue previously recognized
Year 2018: 34.23% completed. Revenue recognized = 34.23% x $ 8,425,000 = $ 2,883,636.
Year 2019: 55.84% completed. Revenue recognized = 55.84% x $ 8,425,000 – $ 2,883,636 (previously recognized) = $ 1,820,620.
Year 2020: 100% completed. Revenue recognized = 100% x $ 8,425,000 – $ 2,883,636- $ 1,820,620 (previously recognized) = $ 3,720,744.
Gross Profit/(Loss)	713,636	(883,380)	(249,256)	H=G-B
Billings during the year	2,704,000.00	2,954,000.00
Collection during the year	2,420,000.00	2,645,000.00

		2018		2019
Ans to 2a and 2b	Journal Entries	Debit $	Credit $		Debit $	Credit $
Costs Incurred	CIP (Work-in-progress)	2,170,000			2,704,000
	Cash		2,170,000			2,704,000
Billing	Accounts Receivable	2,704,000			2,954,000
	Billing on CIP		2,704,000			2,954,000
Receiving Payments	Cash	2,420,000			2,645,000
	Accounts Receivable		2,420,000			2,645,000
Period end adjustments for Revenue	Construction Expense	2,170,000
(Gross Profit entry)	CIP (Work-in-progress)	713,636
	Construction Revenue		2,883,636
Period end adjustments for Revenue	Construction Expense				2,704,000
(Gross Profit entry)	CIP (Work-in-progress)					883,380
	Construction Revenue					1,820,620

Workings for Balance Sheet
CIP (Work-in-progress)
Account	Amount ($)
Cash	2,170,000
Construction Revenue	713,636
Balance at the end of 2018	2,883,636
Cash	2,704,000
Construction Revenue	(883,380)
Balance at the end of 2019	4,704,256
Accounts Receivable
Account	Amount ($)
Billing on CIP	2,704,000
Cash	(2,420,000)
Balance at the end of 2018	284,000
Billing on CIP	2,954,000
Cash	(2,645,000)
Balance at the end of 2019	593,000
Billing on CIP
Account	Amount ($)
Accounts Receivable	2,704,000
Balance at the end of 2018	2,704,000
Accounts Receivable	2,954,000
Balance at the end of 2019	5,658,000

Ans to 3a and 3b
Balance Sheet (Partial)	2018	2019
Current Assets:
CIP (Work-in-progress)	2,883,636	4,704,256
Accounts Receivable	284,000	593,000
	3,167,636	5,297,256
Current Liabilities:
Billing on CIP	2,704,000.00	5,658,000.00
	2,704,000.00	5,658,000.00