On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,000,000. During 2018, costs of $2,000,000 were incurred, with estimated costs of $4,000,000 yet to be incurred. Billings of $2,500,000 were sent, and cash collected was $2,250,000. In 2019, costs incurred were $2,500,000 with remaining costs estimated to be $3,600,000. 2019 billings were $2,750,000, and $2,475,000 cash was collected. The project was completed in 2020 after additional costs of $3,800,000 were incurred. The company's fiscal year-end is December 31. This project does not qualify for revenue recognition over time. Required: 1. Calculate the amount of revenue and gross profit or loss to be recognized in each of the three years. 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 2B Req 1 Req 2A Req 3A Req 3B Calculate the amount of revenue and gross profit or loss to be recognized in each of the three years. (Loss amounts should be indicated with a minus sign.) Gross profit (loss) recognized Revenue Year recognized $ C 0 2018 2019 C 0 2020 8,000,000 (200,000) Total 8,000,000 (200,000) Req 2B Req 3A Req 3B Req 1 Req 2A Prepare journal entries for 2019 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.) No Year General Journal Debit Credit Construction in progress 1 2019 2,500,000 Various accounts 2,500,000 Accounts receivable 2 2019 2,750,000 Billings on construction contract 2,750,000 Cash 3 2019 2,475,000 Accounts receivable 2,475,000 4 2019 Loss on long-term contract Construction in progress 0 Req 2A Req 3A Req 1 Req 2B Req 3B Prepare a partial balance sheet to show the presentation of the project as of December 31, 2018. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.) Balance Sheet At December 31, 2018 Current assets: Accounts receivable C Current liabilities: Billings in excess of costs Req 3A Req 3B Req 1 Req 2A Req 2B 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 C Req 1 Current liabilities: Billings in excess of costs less los C
