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Please help explain why its saying its wrong where it shows the red x’s. Also please help me answer the rest of the parts for 2019 and 2020 as well as the other parts 2a,2b,3a,3b. Thanks
On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,570,000. During 2018, 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 2019, costs incurred were $2,690,000 with remaining costs estimated to be $3,885,000. 2019 billings were $2,940,000 and $2,665,000 cash was collected. The project was completed in 2020 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. Requlrec: 1. Compute the amount of revenue and gross profit or loss to be recognized in 2018, 2019, and 2020 using the percentage of completion method? 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. Answer is not complete. Complete this question by entering your answers in the tabs below Req 1 Req 2A Req 2B Req 3A 2q Compute the amount of revenue and gross profit or loss to be recognized in 2018, 2019, and 2020 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.) Choose denominator % complete to dste Choose numerator Actusl costs to date | ÷ Estimated total costs。 2018 2019 2020 8,380,000 8,785,000 34.3260% 55.8760% 100.0000% 2.190.000 ÷ 4.880.000 2018 Recognized in prior To date Recognized in 2018 2,941,224 2.190,000 751,224 Construction 2941,224 2.190,000 751,224 Gross profit (loss) 2019 Recognized in prior To date Recognized in 2019 Construction 2.941,224 2.190,000 4.770.919 1.829,895 2.190,000 Gross profit (loss) 2020 Recognized in prior To date Recognized in 2020 Construction
Expert Answer
1.
2018
| To Date | Recognised in prior years | Recognised in 2018 | |
| Construction Revenue | $2,941,740* | $0 | $2,941,740 |
| Construction Expense | $2,190,000 | $0 | $2,190,000 |
| Gross Profit (loss) | $751,740** | $0 | $751,740 |
*$8,570,000 x 34.3260% = $2,941,740
**$2,941,740 – $2,190,000 = $751,740
2019
| To date | Recognised in prior years | Recognised in 2019 | |
| Construction Revenue | $4,771,433 | $2,941,740 | $1,829,693 |
| Construction Expense | $4,880,000 | $2,190,000 | $2,690,000 |
| Gross Profit (Loss) | ($108,567) | $751,740 | ($860,307) |
2020
| To date | Recognised in prior years | Recognised in 2020 | |
| Construction Revenue | $8,570,000 | $4,771,433 | $3,798,567 |
| Construction Expense | $8,870,000 | $4,880,000 | $3,990,000 |
| Gross Profit (Loss) | ($300,000) | ($108,567) | ($191,433) |
| 2a | |||
| Year | General Journal | Debit | Credit |
| 2018 | Construction in Progress | $2,190,000 | |
| Various Accounts | $2,190,000 | ||
| 2018 | Accounts Receivable | $2,690,000 | |
| Billings on Construction Contract | $2,690,000 | ||
| 2018 | Cash | $2,440,000 | |
| Accounts Receivable | $2,440,000 | ||
| 2018 | Construction in Progress | $751,740 | |
| Construction Expense | $2,190,000 | ||
| Construction Revenue | $2,941,740 |
| 2b | |||
| Year | General Journal | Debit | Credit |
| 2019 | Construction in Progress | $2,690,000 | |
| Various Accounts | $2,690,000 | ||
| 2019 | Accounts Receivable | $2,940,000 | |
| Billings on Construction Contract | $2,940,000 | ||
| 2019 | Cash | $2,665,000 | |
| Accounts Receivable | $2,665,000 | ||
| 2019 | Construction Expense | $2,690,000 | |
| Construction in Progress | $860,307 | ||
| Construction Revenue | $1,829,693 |
| 3a | |
| Balance sheet | |
| 2018 | |
| Current Assets: | |
| Account Receivable | $250,000 |
| Costs and profit in excess of billings | $251,740 |
| 3b | |
| Balance sheet | |
| 2019 | |
| Current Assets: | |
| Account Receivable | $525,000 |
| Current Liabilities: | |
| Billings in Excess of costs | $858,567 |
