Swallow Corp. has a contract to construct a $5,000,000 cruise ship at an estimated cost of $4,000,000. The company will begin construction of the cruise ship in early January 2011 and expects to complete the project sometime in late 2014. Swallow Corp. has never constructed a cruise ship before, and the customer has never operated a cruise ship. Due to this and other circumstances, Swallow Corp. believes there are inherent hazards in the contract beyond the normal, recurring business risks. Swallow Corp. expects to recover all its costs under the contract. During 2011 and 2012, the company has the following activity:

	2011	2012
Costs to date	980,000 $	$2,040,000
Estimated costs to complete	3,020,000	1,960,000
Progress billings during the year	1,000,000	1,000,000
Cash collected during the year	648,000	1,280,000

For the year ended December 31, 2012, how much revenue should Swallow Corp. recognize on its income statement?

1. $980,000.
2. $2,040,000.
3. $1,300,000.
4. $1,060,000.

Given the information in question 4 above, on its statement of financial position at December 31, 2012, what amount is reported in the cost of construction and billings presentation by Swallow?

1. $40,000 costs in excess of billings.
2. $1,020,000 costs in excess of billings.
3. $40,000 billings in excess of costs.
4. $20,000 billings in excess of costs.

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