On March 1, 2020, 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, 2022. The annual contract costs incurred, estimated costs to complete the contract, and accumulated billings to Fabrik for 2020, 2021, and 2022 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, 2020, 2021, and 2022. (Ignore income taxes.)

b. Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2020, 2021, and 2022. (Ignore incomes taxes.)

2020 2021 2022 Contract costs incurred during the year Estimated costs to complete the contract at 12/31 Billings to Fabrik during the year $2,230,000 $2,880,000 $2,190,000 3,520,000 3,200,000 2,190,000 3,500,000 -0- 1,700,000