On February 1, 2016, Arrow Construction Company entered into a three-year constr

Question

On February 1, 2016, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,450,000. During 2016, costs of $2,180,000 were incurred, with estimated costs of $4,180,000 yet to be incurred. Billings of $2,716,000 were sent and cash collected was $2,430,000. In 2017, costs incurred were $2,716,000 with remaining costs estimated to be $3,870,000. 2017 billings were $2,966,000, and $2,655,000 cash was collected. The project was completed in 2018 after additional costs of $3,980,000 were incurred. The company’s fiscal year-end is December 31. This project does not qualify for revenue recognition over time. Required: 1. Calculate the amount of revenue and gross profit or loss to be recognized in each of the three years. (PLEASE show how to work out the steps, thank you!)

Explanation / Answer

2017

Loss To be recognized in the year of occurance

2018 Revenue 8450000-(8876000)Cost = gross profit -426000

Revenue Recognized Gross profit Recognized 2016 0 0 2017 0 -316000 2018 84,50,000 -110000 Total 84,50,000 -4,26,000

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