Exercise 6-21 (Algo) Longterm contract, revenue recognition over time; loss projected on entire project [106.9]

On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,570,000. During 2021, costs of $2,190,000 were incurred with estimated costs of $4,190,000 yet to be incurred. Billings of $2,690,000 were sent, and cash collected was $2,440,000.

In 2022, costs incurred were $2,690,000 with remaining costs estimated to be $3,885,000. 2022 billings were $2,940,000 and $2,665,000 was collected. The project was completed in 2023 after additional costs of $3,990,000 were incurred. The company's 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 2021, 2022 and 2023 using the percentage of completion method.

2a.) Prepare journal entries for 2021 to record the transactions described (credit "various accounts" for construction costs incurred).

2b.) Prepare journal entries for 2022 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, 2021.

3b.) Prepare a partial balance sheet to show the presentation of the prolect as of December 31, 2022.

Please show calculations and give explanation for balance sheets

On February 1, 2021, Arrow Construction Company entered into a three year construction contract to build a bridge for a price of $8,570,000 During 2021, costs of $2,190,000 were incurred with estimated costs of $4.190,000 yet to be incurred. Billings of $2,690,000 were sent, and cash collected was $2,440,000 In 2022, costs incurred were $2,690,000 with remaining costs estimated to be $3,885,000. 2022 billings were $2,940,000 and $2,665,000 cash was collected. The project was completed in 2023 after additional costs of $3,990.000 were incurred. The company's 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 2021 2022 and 2023 using the percentage of completion method 21. Prepare journal entries for 2021 to record the transactions described (credit various accounts for construction costs incurred). 2b. Prepare journal entries for 2022 to record the transactions described (credit various accounts for construction costs incurred) 30. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2021 3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2022 Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. keq 1 Meg 2 Reg ku Heg Ke 3 Compute the amount of revenue and gross profit or loss to be recognized in 2021, 2022, and 2023 using the percentage of completion method. (Do not round intermediate calculations. Loss amounts should be indicated with a minus sign, Round your final answers to the nearest whole dollar) % complete to date 3 34.3200% 2021 2022 2023 Percentages of completion Choose numerator Choose denominator Actual costs to date Estimated total costs 2,100,000 $ 0,380.000 4,880,000 5 8.705.000 8,870,000 5 8,870,000 2021 To date Recognized in prior years 2,941,740 0 2.100,000 0 751.740 0 55.6760% 100.0000% $ 15 $ Construction revenue Construction expense Gross profit (los) Recognized in 2021 2,941,740 2,190,000 751.740 $ IS CO Construction revenue Construction expense Gross proft loss To date 4.771,432 4,880,000 (108.508) 2022 Recognized in prior years $ 2,041,740 2.100.000 751,740 13 S Recognized in 2022 1.829.092 2.000.000 (800,308) 5 15 Construction revenue Construction expense Gross profits To date 8,570,000 8.870.000 (300.000) 2023 Recognized in prior years S 4,771.432 4.880.000 (108,508) XS Recognized in 2023 3.798.800 3.000.000 (101.432) Req 1 Req 2A Req 2e Reg 3A Req 38 Prepare journal entries for 2021 to record the transactions described (credit "various accounts" for construction costs incurred). (if no entry is required for a transaction/event, select "No journal entry required" in the first account field. De round intermediate calculations, Round your answers to the nearest dollar amount.) No Year General Journal Debit Credit 1 2021 2.190.000 Construction in progress Various accounts O 2,100,000 2 2021 > Accounts receivable Billings on construction contract 2,890.000 2,690,000 3 2021 Cash > 2.440,000 Accounts receivable 2.440.000 4 2021 Cost of construction Construction in progress Revenue from long-term contracts 2.190.000 751.740 2.941.740 Reg 1 Reg 2A Reg 28 Reg 3A Req 3B Prepare journal entries for 2022 to record the transactions described (credit "various accounts for construction costs incurred). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Do not round intermediate calculations. Round your answers to the nearest dollar amount.) No Year General Journal Debit Credit 1 2022 Construction in progress 2,690,000 Various accounts 2,690,000 2. 2022 Accounts receivable Billings on construction contract 2.940,000 2.940,000 3 2022 Cash Accounts receivable 2.665.000 30 2,665,000 2022 3 2.776 433 Cost of construction Construction in progress Revenue from long-term contracts 946.741 1,829,692 Reg 1 Reg 2A Reg 28 Reg 3A Req 3B Prepare a partial balance sheet to show the presentation of the project as of December 31, 2021. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.) Balance Sheet (Partial) At December 31, 2021 Current assets Accounts receivable $ 250,000 Construction in progress 2,941,740 X Billings on construction contract (2,690,000) Costs and profit in excess of billings 251,740 Current liabilities Reg 1 Reg 2A Reg 28 Req 3A Reg 38 Prepare a partial balance sheet to show the presentation of the project as of December 31, 2022. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.) Balance Sheet (Partial) At December 31, 2022 Current assets Accounts receivable $ 525,000 x $ Current liabilities Billings on construction contract Construction in progress Billings in excess of costs less loss 5,630,000 (4.771,432) 858,568