In 2007 Tarlo Company agrees to construct a highway for Brice County over a three-year period (2007 through 2009). The contract price is $1,200,000 and the construction costs (both actual and estimated) total $705,000 for the three years. The percentage completed at the end of each year is as follows: 2007, 20%; 2008, 75%; 2009, 100%.
Required
1. Prepare a schedule showing the amount of gross profit that Tarlo Company recognizes each year using the percentage-of completion method.
2. Prepare a schedule showing the amount of gross profit that Tarlo Company recognizes each year using the completed contract method.