On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,060,000. During 2021, costs of $2,020,000 were incurred with estimated costs of $4,020,000 yet to be incurred. Billings of $2,520,000 were sent, and cash collected was $2,270,000. In 2022, costs incurred were $2,520,000 with remaining costs estimated to be $3,630,000. 2022 billings were $2,770,000 and $2,495,000 cash was collected. The project was completed in 2023 after additional costs of $3,820,000 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 2021, 2022, and 2023 using the percentage of completion method. 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 project as of December 31, 2022.

Balance Sheet (Partial) December 31, 2021

Balance Sheet (Partial) December 31, 2022

Percentages of completion Choose numerator Choose denominator % complete to date = Actual costs to date Estimated total costs $ 2021 2,020,000 6,040,000 33.4437% $ 4,540,000 8,170,000 2022 55.5692% $ 2021 2023 $ 8,360,000 100.0000% 8,360,000 To date Recognized in prior years Recognized in 2021 $ $ Construction revenue 2,695,562 2,695,562 Construction expense 2,020,000 $ 675,562 $ 0 $ $ 2,020,000 $ Gross profit (loss) 0 675,562 $ 2022 Recognized in prior years To date Recognized in 2022 Construction revenue 2,695,562 $ $ 4,478,877 1,783,315 Construction expense 4,520,000 $ 2,020,000 $ $ 2,500,000 Gross profit (loss) (72,274) $ 675,562 (747,836) 2022 Recognized in prior years To date Recognized in 2023 Construction revenue $ 8,060,000 4,478,877 3,581,123 Construction expense $ $ 8,360,000 8,360,000 Gross profit (loss) (300,000) (300,000) Balance Sheet (Partial) At December 31, 2021 Current assets: Current liabilities: Balance Sheet (Partial) At December 31, 2022 Current assets: Current liabilities: Percentages of completion Choose numerator Choose denominator % complete to date = Actual costs to date Estimated total costs $ 2021 2,020,000 6,040,000 33.4437% $ 4,540,000 8,170,000 2022 55.5692% $ 2021 2023 $ 8,360,000 100.0000% 8,360,000 To date Recognized in prior years Recognized in 2021 $ $ Construction revenue 2,695,562 2,695,562 Construction expense 2,020,000 $ 675,562 $ 0 $ $ 2,020,000 $ Gross profit (loss) 0 675,562 $ 2022 Recognized in prior years To date Recognized in 2022 Construction revenue 2,695,562 $ $ 4,478,877 1,783,315 Construction expense 4,520,000 $ 2,020,000 $ $ 2,500,000 Gross profit (loss) (72,274) $ 675,562 (747,836) 2022 Recognized in prior years To date Recognized in 2023 Construction revenue $ 8,060,000 4,478,877 3,581,123 Construction expense $ $ 8,360,000 8,360,000 Gross profit (loss) (300,000) (300,000) Balance Sheet (Partial) At December 31, 2021 Current assets: Current liabilities: Balance Sheet (Partial) At December 31, 2022 Current assets: Current liabilities