In 2013, Tarlo Company agrees to construct a highway for Brice County over a 3-year period (2013 through 2015). The contract price is $1,200,000, and the construction costs (both actual and estimated) total $705,000 for the 3 years. The percentage completed at the end of each year is as follows: 2013, 20%; 2014, 75%; 2015, 100%.

Required:

1. Prepare a schedule showing the amount of gross profit that Tarlo recognizes each year using the percentage-of completion method.

2. Prepare a schedule showing the amount of gross profit that Tarlo recognizes each year using the completed contract method.