Shanahan Construction Company has entered into a non-cancellable contract beginning January 1, 2020, to build a parking complex. It has been estimated that the complex will cost $600,000 and will take three years to construct. The complex will be billed to the purchasing company at $900,000. The following data pertain to the construction period.

Instructions

a. Using the percentage-of-completion method, calculate the estimated gross profit that would be recognized during each year of the construction period.

b. Using the completed-contract method, calculate the estimated gross profit that would be recognized during each year of the construction period.

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2020 2021 2022 Costs to date Estimated costs to complete Progress billings to date (non-refundable) Cash collected to date $270,000 330,000 270,000 240,000 $450,000 $610,000 -0- 900,000 550,000 500,000 900,000