Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,420,000. During 2021, costs

On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,420,000. During 2021, costs of $2,140,000 were incurred with estimated costs of $4,140,000 yet to be incurred. Billings of $2,640,000 were sent, and cash collected was $2,390,000. In 2022, costs incurred were $2,640,000 with remaining costs estimated to be $3,810,000. 2022 billings were $2,890,000 and $2,615,000 cash was collected. The project was completed in 2023 after additional costs of $3,940,000 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.

image text in transcribed

+ = % complete to date 2021 $ Percentages UI CUMPLUI Choose numerator Choose denominator Actual costs to date Estimated total costs 2,140,000 $ 6,280,000 4,780,000+ $ 8,590,000 8,720,000 $ 8,720,000 2021 34.0764% 2022 $ = 55.6461% 100.0000% 2023 $ To date Recognized in prior years Construction revenue $ 2,869,236 $ 0 $ Recognized in 2021 2,869,236 2,140,000 729,236 $ $ 0 $ Construction expense Gross profit (loss) 2,140,000 729,236 $ $ 0$ 2022 To date 4,685,730$ Construction revenue $ Recognized in prior years 2,869,236 $ 2,140,000 $ 729,236 $ Recognized in 2022 1,816,494 (2,140,000) (729,236) $ Construction expense Gross profit (loss) $ Construction revenue $ 2023 To date Recognized in prior years 8,420,000 $ 4,685,402 $ 8,720,000 $ (300,000) Recognized in 2023 3,734,598 8,720,000 (300,000) $ Construction expense Gross profit (loss) $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Tools For Business Decision Making

Authors: Paul D. Kimmel

3rd Edition

0470377852, 978-0470377857

More Books

Students also viewed these Accounting questions