Solution 1:
Computation of % of completion, revenue recognition and Gross Profit - Arrow Construction Company | |||||||||
Year | Actual cost incurred (A) | Total cost incurred till date (B) | Total estimated Cost ( C ) | % of completion (D) (B/C) |
Contract Price (E) |
Total Revenue to be recoganized (F) (E * D) | Revenue for current period (G) | Gross Profit (H) | |
2021 | $2,130,000 | $2,130,000 | $6,260,000 | 34.03% | $8,390,000 | $2,854,744 | $2,854,744 | $724,744 | $2,854,744 - $2,130,000 |
2022 | $2,630,000 | $4,760,000 | $8,555,000 | 55.64% | $8,390,000 | $4,668,194 | $1,813,450 | -$889,744 | $8,390,000 - $8,555,000 - $724,744 |
2023 | $3,930,000 | $8,690,000 | $8,690,000 | 100.00% | $8,390,000 | $8,390,000 | $3,721,806 | -$135,000 | $8,390,000 - $8,690,000 - $724,744 + $889,744 |
Solution 2a:
Journal Entries - Arrow Construction Company - 2021 | |||
Event | Particulars | Debit | Credit |
1 | Construction in Progress Dr | $2,130,000.00 | |
To Various Accounts | $2,130,000.00 | ||
(To record construction cost incurred) | |||
2 | Accounts receivables Dr | $2,630,000.00 | |
To Billings on construction contract | $2,630,000.00 | ||
(To record progress billings) | |||
3 | Cash Dr | $2,380,000.00 | |
To Accounts receivables | $2,380,000.00 | ||
(To record collection from customer) | |||
4 | Construction in Progress Dr | $724,744.00 | |
Cost of construction Dr | $2,130,000.00 | ||
To Revenue from long term contracts | $2,854,744.00 | ||
(To record revenue and gross profit) |
Solution 2b:
Journal Entries - Arrow Construction Company - 2022 | |||
Event | Particulars | Debit | Credit |
1 | Construction in Progress Dr | $2,630,000.00 | |
To Various Accounts | $2,630,000.00 | ||
(To record construction cost incurred) | |||
2 | Accounts receivables Dr | $2,880,000.00 | |
To Billings on construction contract | $2,880,000.00 | ||
(To record progress billings) | |||
3 | Cash Dr | $2,605,000.00 | |
To Accounts receivables | $2,605,000.00 | ||
(To record collection from customer) | |||
4 | Cost of construction Dr | $2,703,194.00 | |
To Construction in Progress | $889,744.00 | ||
To Revenue from long term contracts | $1,813,450.00 | ||
(To record revenue and gross profit) |
Solution 3a & 3b:
Arrow construction company | ||
Balance Sheet (Partial) | ||
As on December 31 | ||
Particulars | 2021 | 2022 |
Assets: | ||
Current Assets: | ||
Accounts
Receivables 2021 - $2,630,000 - $2,380,000 2022 - $250,000 + $2,880,000 - $2,605,000 |
$250,000.00 | $525,000.00 |
Cost and
Profit in excess of billing 2021 - $2,854,744 - $2,630,000 |
$224,744.00 | |
Liabilities and stockholder's equity: | ||
Current liabilities: | ||
Billings
in excess of costs and profits ($2,880,000 - $2,630,000 + $889,744 - $224,744) |
$915,000.00 |
Saved Help Save & Exit Submit Exercise 6-21 (Algo) Long-term contract; revenue recognition over time; loss...
Exercise 6-21 (Algo) Long-term contract; revenue recognition over time; loss projected on entire project [LO6-9] On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,300,000. During 2021, costs of $2,100,000 were incurred with estimated costs of $4,100,000 yet to be incurred. Billings of $2,600,000 were sent, and cash collected was $2,350,000. In 2022, costs incurred were $2,600,000 with remaining costs estimated to be $3,750,000. 2022 billings were $2,850,000...
Exercise 6-21 (Algo) Long-term contract; revenue recognition over time; loss projected on entire project (LO6-9) On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,270,000. During 2021, costs of $2,090,000 were incurred with estimated costs of $4,090,000 yet to be incurred. Billings of $2,590,000 were sent, and cash collected was $2,340,000. points eBook In 2022, costs incurred were $2,590,000 with remaining costs estimated to be $3,735,000. 2022 billings...
On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8.210,000. During 2021, costs of $2,070,000 were incurred with estimated costs of $4,070,000 yet to be incurred. Billings of $2,570,000 were sent, and cash collected was $2,320,000. In 2022, costs incurred were $2,570,000 with remaining costs estimated to be $3,705.000. 2022 billings were $2.820,000 and $2,545,000 cash was collected. The project was completed in 2023 after additional costs of...
Exercise 6-21 (Algo) Long-term contract; revenue recognition over time; loss projected on entire project [LO6-9] On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,390,000. During 2021, costs of $2,130,000 were incurred with estimated costs of $4,130,000 yet to be incurred. Billings of $2,630,000 were sent, and cash collected was $2,380,000. In 2022, costs incurred were $2,630,000 with remaining costs estimated to be $3,795,000. 2022 billings were $2,880,000...
On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,390,000. During 2021, costs of $2.130,000 were incurred with estimated costs of $4,130,000 yet to be incurred. Billings of $2,630,000 were sent, and cash collected was $2,380,000. In 2022, costs incurred were $2.630,000 with remaining costs estimated to be $3,795,000.2022 billings were $2,880,000 and $2,605,000 cash was collected. The project was completed in 2023 after additional costs of $3,930,000...
Please help!
On February 1, 2021, Arrow Construction Company entered into a three-vear construction contract to build a bridge for a price of $8,200,000. During 2021, costs of $2,080,000 were incurred, with estimated costs of $4,080,000 yet to be incurred. Billings of $2,596,000 were sent, and cash collected was $2,330,000. In 2022, costs incurred were $2,596,000 with remaining costs estimated to be $3.720.000. 2022 billings were $2,846,000, and $2,555,000 cash was collected. The project was completed in 2023 after additional...
On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,240,000. During 2021, costs of $2,080,000 were incurred with estimated costs of $4,080,000 yet to be incurred. Billings of $2,580,000 were sent, and cash collected was $2.330,000. In 2022, costs incurred were $2,580,000 with remaining costs estimated to be $3,720,000. 2022 billings were $2.830,000 and $2,555,000 cash was collected. The project was completed in 2023 after additional costs of...
Required information Problem 6-10 (Algo) Long-term contract; revenue recognition over time (LO6-8, 6-9) [The following information applies to the questions displayed below.) In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2023. Information related to the contract is as follows: 2023 $2,008,600 Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year 2021...
Exercise 6-22 (Algo) Long-term contract; revenue recognition upon project completion; loss projected on entire project [LO6-8, 6-9] On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,125,000. During 2021, costs of $2,050,000 were incurred, with estimated costs of $4,050,000 yet to be incurred. Billings of $2,560,000 were sent, and cash collected was $2,300,000. In 2022, costs incurred were $2,560,000 with remaining costs estimated to be $3,675,000. 2022 billings...
Problem 6-11 (Algo) Long-term contract; revenue recognition upon completion (LO6-9) In 2021, the Westgate Construction Company entered into a contract to construct a road for Santa Clara County for $10,000,000. The road was completed in 2023. Information related to the contract is as follows: 2023 $1,797,400 Cost incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year 2021 $3,096,000 5,504,000 2,600,000 2,400,000 2022 $3,870,000 1,634,000 4,366,000 4,200,000 3,034,000 3,400,000 Assume...