On March 1, 2022, Pechstein Construction Company contracted to construct a factory building for Fabrik Manufacturing Inc. for a total contract price of $8,400,000. The building was completed by October 31, 2024. The annual contract costs incurred, estimated costs to complete the contract, and accumulated billings to Fabrik for 2022, 2023, and 2024 are given below.

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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2022 2023 2024 Contract costs incurred during the year $2,880,000 $2,230,000 $2,190,000 Estimated costs to complete the contract at 12/31 3,520,000 2,190,000 Billings to Fabrik during the year 3,200,000 3,500,000 1,700,000