On February 1, 2018, Arrow Construction Company entered into a three-year construction contract to build a bridge for a price of $8,180,000. During 2018, costs of $2,060,000 were incurred with estimated costs of $4,060,000 yet to be incurred. Billings of $2,560,000 were sent, and cash collected was $2,310,000. In 2019, costs incurred were $2,560,000 with remaining costs estimated to be $3,690,000. 2019 billings were $2,810,000 and $2,535,000 cash was collected. The project was completed in 2020 after additional costs of $3,860,000 were incurred. The company's fiscal year-end is December 31. Arrow recognizes revenue over time according to percentage of completion.

revenue recognized

gross profit

Explanation:

Percentage of                      2018                2019                 2020

completion method

Cost incurred in                   $0            $2,060,000      $4,620,000

previous year

+ Cost incurred              $2,060,000   $2,560,000      $3,860,000

during the year

Total cost incurred        $2,060,000    $4,620,000      $8,480,000

+ Estimated cost to       $4,060,000    $3,690,000            $0

be incurred

Total estimated cost     $6,120,000     $8,310,000       $8,480,000

to be incurred

Percentage of                   33.66%              55.60%             100%

completion

Total revenue                $8,180,000    $8,180,000         $8,180,000

Total revenue                $2,753,388    $4,548,080        $8,180,000

recognized (% of completion x total revenue)

- Revenue recognized       ($0)           ($2,753,388)       ($4,548,080)

in previous year    

= revenue recognized  $2,753,388     $1,794,692         $3,631,920

in current year

gain/loss                              2018               2019                 2020

Revenue                       $2,753,388     $1,794,692         $3,631,920

- Cost incurred           ($2,060,000)  ($2,560,000)      ($3,860,000 )

Gross profit                     $693,388      -$765,308           -$228,080