---### Educational Scenario: Revenue and Gross Profit Calculation for a Construction Project#### Background InformationOn February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,000,000. The project timeline and financial details over the years are as follows:- **2021**: - Costs incurred: $2,000,000 - Estimated remaining costs: $4,000,000 - Billings sent: $2,500,000 - Cash collected: $2,250,000- **2022**: - Costs incurred: $2,500,000 - Estimated remaining costs: $3,600,000 - Billings sent: $2,750,000 - Cash collected: $2,475,000- **2023**: - Costs incurred: $3,800,000The project was completed in 2023 and Arrow Construction Company does not qualify for revenue recognition over time. The company’s fiscal year-end is December 31.#### Required Calculations and Entries1. **Calculate the amount of revenue and gross profit or loss to be recognized in each of the three years.**2. **Prepare journal entries:** - **2021:** Record transactions for construction costs incurred (credit "various accounts" for construction costs incurred). - **2022:** Record transactions for construction costs incurred (credit "various accounts" for construction costs incurred).3. **Prepare partial balance sheets:** - **2021:** Show the project's presentation as of December 31, 2021. - **2022:** Show the project's presentation as of December 31, 2022.#### Instructions for StudentsComplete these requirements by entering your answers in the tabs provided below.##### Tabulated Summary for Required 1| Year | Revenue Recognized | Gross Profit (Loss) Recognized ||------|-------------------|-------------------------------|| 2021 | | || 2022 | | || 2023 | | || **Total** | | |*(Loss amounts should be indicated with a minus sign.)*---

a.Calculate the revenue recognition for the year 2021Calculate the revenue recognition for the year…

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 2021 to record the transactions described (credit "various accounts" for construction costs incurred). 2b. Prepare journal entries for 2022 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, 2021. 3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2022.

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 2021 to record the transactions described (credit "various accounts" for construction costs incurred). 2b. Prepare journal entries for 2022 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, 2021. 3b. Prepare a partial balance sheet to show the presentation of the project as of December 31, 2022.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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