In 2017, Tarlo Company agrees to construct a highway for Brice County over a 3 year period ( 2017 through 2019). The contract price is $ 1,200,000, and the construction costs ( both actual and estimated) total $ 705,000 for the 3 years. Tarlo’s estimate of progress toward satisfaction of the performance obligation at the end of each year is as follows: 2017, 20%; 2018, 75%; 2019, 100%.
Required:
1. Prepare a schedule showing the amount of gross profit that Tarlo recognizes each year assuming the performance obligation is determined to be satisfied over time.
2. Prepare a schedule showing the amount of gross profit that Tarlo recognizes each year assuming the performance obligation is satisfied at a point in time.