On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,375,000. During 2021, costs of $2,150,000 were incurred, with estimated costs of $4,150,000 yet to be incurred. Billings of $2,680,000 were sent, and cash collected was $2,400,000.

In 2022, costs incurred were $2,680,000 with remaining costs estimated to be $3,825,000. 2022 billings were $2,930,000, and $2,625,000 cash was collected. The project was completed in 2023 after additional costs of $3,950,000 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.
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.

Allocating Joint Costs Using the Constant Gross Margin Method

A company manufactures three products, L-Ten, Triol, and Pioze, from a joint process. Each production run costs $12,800. None of the products can be sold at split-off, but must be processed further. Information on one batch of the three products is as follows:

Required:

1. Calculate the total revenue, total costs, and total gross profit the company will earn on the sale of L-Ten, Triol, and Pioze.

2. Allocate the joint cost to L-Ten, Triol, and Pioze using the constant gross margin percentage method. Round the gross margin percentage to four decimal places and round all other computations to the nearest dollar.

(Note: The joint cost allocation does not equal due to rounding.)

On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,475,000. During 2021, costs of $2,190,000 were incurred, with estimated costs of $4,190,000 yet to be incurred. Billings of $2,728,000 were sent, and cash collected was $2,440,000.

In 2022, costs incurred were $2,728,000 with remaining costs estimated to be $3,885,000. 2022 billings were $2,978,000, and $2,665,000 cash was collected. The project was completed in 2023 after additional costs of $3,990,000 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.
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.

5. The following ledger accounts are used by the Heartland Race Track:

Accounts Receivable

Prepaid Advertising

Prepaid Rent

Unearned Sales Revenue

Sales Revenue

Advertising Expense

Rent Expense

Instructions:

For each of the following transactions below, prepare the journal entry (if one is required) to record the initial transaction and then prepare the adjusting entry, if any, required on November 30, the end of the fiscal year.

(a) On November 1, paid rent on the track facility for three months, $150,000.

(b) On November 1, sold season tickets for admission to the racetrack. The racing season is year-round with 25 racing days each month. Season ticket sales totaled $960,000.

(c) On November 1, borrowed $250,000 from First National Bank by issuing a 6% note payable due in three months.

(d) On November 5, programs for 20 racing days in November, 25 racing days in December and 15 racing days in January were printed for $3,000.

(e) The accountant for the concessions company reported that gross receipts for November were $140,000. Ten percent is due to Heartland and will be remitted by December 10.

On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,425,000. During 2018, costs of $2,170,000 were incurred, with estimated costs of $4,170,000 yet to be incurred. Billings of $2,704,000 were sent, and cash collected was $2,420,000.

In 2019, costs incurred were $2,704,000 with remaining costs estimated to be $3,855,000. 2019 billings were $2,954,000, and $2,645,000 cash was collected. The project was completed in 2020 after additional costs of $3,970,000 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.
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.

On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,175,000. During 2021, costs of $2,070,000 were incurred, with estimated costs of $4,070,000 yet to be incurred. Billings of $2,584,000 were sent, and cash collected was $2,320,000.

In 2022, costs incurred were $2,584,000 with remaining costs estimated to be $3,705,000. 2022 billings were $2,834,000, and $2,545,000 cash was collected. The project was completed in 2023 after additional costs of $3,870,000 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.
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.

On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,400,000. During 2018, costs of $2,160,000 were incurred, with estimated costs of $4,160,000 yet to be incurred. Billings of $2,692,000 were sent, and cash collected was $2,410,000. In 2019, costs incurred were $2,692,000 with remaining costs estimated to be $3,840,000. 2019 billings were $2,942,000, and $2,635,000 cash was collected. The project was completed in 2020 after additional costs of $3,960,000 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. 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.

On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,375,000. During 2021, costs of $2,150,000 were incurred, with estimated costs of $4,150,000 yet to be incurred. Billings of $2,680,000 were sent, and cash collected was $2,400,000.

In 2022, costs incurred were $2,680,000 with remaining costs estimated to be $3,825,000. 2022 billings were $2,930,000, and $2,625,000 cash was collected. The project was completed in 2023 after additional costs of $3,950,000 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.
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.

On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,500,000. During 2018, costs of $2,200,000 were incurred, with estimated costs of $4,200,000 yet to be incurred. Billings of $2,740,000 were sent, and cash collected was $2,450,000.

In 2019, costs incurred were $2,740,000 with remaining costs estimated to be $3,900,000. 2019 billings were $2,990,000, and $2,675,000 cash was collected. The project was completed in 2020 after additional costs of $4,000,000 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.
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.

On February 1, 2021, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,350,000. During 2021, costs of $2,140,000 were incurred, with estimated costs of $4,140,000 yet to be incurred. Billings of $2,668,000 were sent, and cash collected was $2,390,000.

In 2022, costs incurred were $2,668,000 with remaining costs estimated to be $3,810,000. 2022 billings were $2,918,000, and $2,615,000 cash was collected. The project was completed in 2023 after additional costs of $3,940,000 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.

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.