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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

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

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