On July 1, 2022, Torvill Construction Company Inc. contracted to build an office building for Gumbel Corp. for a total contract price of $1,900,000. On July 1, Torvill estimated that it would take between 2 and 3 years to complete the building. On December 31, 2024, the building was deemed substantially completed. Following are accumulated contract costs incurred, estimated costs to complete the contract, and accumulated billings to Gumbel for 2022, 2023, and 2024.

Instructions

a. Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2022, 2023, and 2024. 

b. Using the cost-recovery method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2022, 2023, and 2024.

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At 12/31/22 At 12/31/23 At 12/31/24 Contract costs incurred to date $ 300,000 $1,200,000 $2,100,000 Estimated costs to complete the contract 1,200,000 800,000 -0- Billings to Gumbel 300,000 1,100,000 1,850,000