On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,390,000. During 2021, costs of $2,130,000 were incurred with estimated costs of $4,130,000 yet to be incurred. Billings of $2,630,000 were sent, and cash collected was $2,380,000. In 2022, costs incurred were $2,630,000 with remaining costs estimated to be $3,795,000. 2022 billings were $2,880,000 and $2,605,000 cash was collected. The project was completed in 2023 after additional costs of $3,930,000 were incurred. The companys fiscal year-end is December 31. Arrow recognizes revenue over time according to percentage of completion.

What is the construction expense and gross profit for the second year 2022? 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.

Percentages of completion Choose numerator Choose denominator = % complete to date Actual costs to date Estimated total costs 2021 $ $ 34.0256% 2022 $ 2,130,000 4,760,000 8,690,000 . $ 6,260,000= 8,555,000= 8,690,000 55.6400% 2023 $ 100.0000% $ 2021 To date Recognized in prior years 2,854,744 $ 2,130,000 $ 724,744 $ Construction revenue Construction expense Gross profit (loss) 0$ Recognized in 2021 2,854,744 2,130,000 724,744 $ 0$ $ 0 $ Construction revenue 2022 To date Recognized in prior years 4,668,194 $ 2,854,744 $ 1,813,450 $ 2,130,000$ (816,550) $ 724,744 $ Recognized in 2022 1,813,450 (316,550) (1,541,294) Construction expense $ Gross profit (loss) $ 2023 To date Recognized in prior years 4,668,194 Construction revenue $ $ 8,390,000 $ 8,690,000 Recognized in 2023 3,721,806 8,690,000 Construction expense Innnnnn innnnnnn % complete to date 2021 $ Percentages of completion Choose numerator + Choose denominator Actual costs to date Estimated total costs 2,130,000+ $ 6,260,000 4,760,000+ $ 8,555,000 = 8,690,000 $ 8,690,000 2021 = 2022 $ 34.0256% 55.6400% 100.0000% 2023 $ To date Recognized in prior years $ 0 $ Construction revenue Construction expense Gross profit (loss) 2,854,744 $ 2,130,000$ 724,744 $ $ Recognized in 2021 2,854,744 2,130,000 724,744 0 $ OOO $ 0 $ 2022 $ Construction revenue Construction expense Gross profit (loss) To date 4,668,194 $ 4,760,000 X $ (91,806) X $ Recognized in prior years 2,854,744 $ 2,130,000$ 724,744 $ Recognized in 2022 1,813,450 2,630,000 (816,550) $ $ 2023 $ Construction revenue Construction expense Gross profit (loss) To date 8,390,000$ 8,690,000 (300,000) Recognized in prior years 4,668,194 $ $ Recognized in 2023 3,721,806 8,690,000 (300,000) $ $ $