Question

In early 2019, Bridge Company entered into a long term contract to construct a bridge for Greensville County for $10 million. The bridge will take three years to complete. In 2019, Bridge spent $2.8 million on the project, recognized $3.5 million in revenue and $.7 million in profit. In 2020, Bridge spent $4.2 million on the project, recognized $3.8 million in revenue and a $.4 million loss. Bridge billed Greensville $3.0 million in 2019 and $4.5 million in 2020. Greensville paid Bridge $2.6 million in 2019 and $4.3 million in 2020. Bridge Company recognizes revenue on all contracts over time, as the project is being completed by using the cost to cost approach. When preparing the December 31, 2019 and the December 31, 2020 balance sheets what would Bridge report in regards to this contract?

Answer 1

	Contract Price	10,000,000
	In 2019		Billed
	Revenue Recognized	3,500,000
Less:	Cost incurred	2,800,000
	Profit booked	700,000
	Billed	3,000,000
Less:	Collected	2,600,000
		400,000
	In 2020
	Revenue Recognized	3,800,000
Less:	Cost incurred	4,200,000
	Profit booked	(400,000)
	Billed	4,500,000
Less:	Collected	4,300,000
		200,000
	In 2019
	Contract asset (Revenue recognised-billed)	500,000	(3.5m-3m)
	Accounts Receivable(Billed-collected)	400,000	(3m-2.6m)
	In 2020
	Contract Liability (billed till date -Revenue recognised till date)	200,000	(3m+4.5m-3.5m-3.8m)
	Accounts Receivable(Billed till date -collected till date)-contract liability if any	400,000	(3m+4.5m-2.6-4.3-.2m)