Due 6/15

On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,600,000. During 2018, costs of $2,200,000 were incurred with estimated costs of $4,200,000 yet to be incurred. Billings of $2,700,000 were sent, and cash collected was $2,450,000. In 2019, costs incurred were $2,700,000 with remaining costs estimated to be $3,900,000. 2019 billings were $2,950,000 and $2,675,000 cash was collected. The project was completed in 2020 after additional costs of $4,000,000 were incurred. The companys fiscal year-end is December 31. Arrow recognizes revenue over time according to percentage of completion. Required: 1. Compute the amount of revenue and gross profit or loss to be recognized in 2018, 2019, and 2020 using the percentage of completion method? 2a. Prepare journal entries for 2018 to record the transactions described (credit "various accounts" for construction costs incurred). 2b. Prepare journal entries for 2019 to record the transactions described (credit "various accounts" for construction costs incurred). 3a. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2018. 3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2019.

Req 2A

Req 2B

Percentages of completion % complete to date Choose numerator Choose denominator Actual costs to date Estimated total costs 2018 $ $ 34.3750% 2,200,000 6,400,000 $ 4,900,000 $ 55.6818% 2019 8,800,000 2020 100.0000% 2018 To date Recognized in prior years Recognized in 2018 2,956,250 S 0 $ Construction revenue $ 2,956,250 Construction expense $ $ 2,200,000 2,200,000 0 Gross profit (loss) $ $ 756,250 0 756,250 2019 To date Recognized in prior years Recognized in 2019 Construction revenue $ $ $ 4,788,635 2,956,250 1,832,385 Construction expense 2,200,000 $ $ (2,200,000) Gross profit (loss) $ (756,250) 756,250 2020 To date Recognized in prior years Recognized in 2020 4,788,635$ Construction revenue 8,600,000 S $ 3,811,365 Construction expense $ 0 Gross profit (loss) $ 0 Journal entry worksheet 1 2 3 5 Record the expected loss. Note: Enter debits before credits. Debit Year General Journal Credit 2018 Record entry View general journal Clear entry LO Journal entry worksheet 1 2 3 4 Record the gross profit. Note: Enter debits before credits. Year Debit General Journal Credit 2019 Record entry View general journal Clear entry LO