Star Construction Corporation has a contract to construct a building for $ 10,950,000. he building is controlled by the customer throughout the term of the contract. Total costs to complete the building were originally estimated at $ 8,850,000. Construction commenced on 4 February 20X5. Actual costs were in line with estimated costs for 20X5 and 20X6. In 20X7, actual costs exceeded estimated costs by $ 150,000.

Total construction costs incurred in each year were as follows:

20X5 .............$ 2,700,000

20X6 .............$ 4,500,000

20X7 .............$ 1,800,000

Progress billings based on the amount of work completed were collected each year. Star Construction uses the percentage- of- completion method. The percentage- of completion is based on costs incurred compared with estimated total costs of the project.

Required:

1. Calculate the revenues and gross profit for the construction project for each of the three years.

2. Prepare all of the journal entries for revenue recognition for each year until completion in 20X7.