1. ELO Construction Co. began operations in 2017. Construction activity for 2017 is shown below. ELO uses the completed-contract method.

Contract 1: Contract Price $4,650,000 Costs to 12/31/17 $3,700,000 Estimated Costs to Complete $0

Contract 2: Contract Price $3,600,000 Costs to 12/31/17 $870,000 Estimated Costs to Complete $2,030,000

Contract 3: Contract Price $3,100,000 Costs to 12/31/17 $1,680,000 Estimated Costs to Complete $1,120,000

What amount of gross profit should be reported on the income statement for 2017?

2.

Mycroft signed a contract with Holmes on March 31, 2015, for Holmes to build a yacht for Mycroft, with delivery on November 30, 2015. Three months after delivery the agreed $4.5 million would be paid by Mycroft. Because of uncertainty on whether rare requested construction materials would be available, either party is able to leave the contract without penalty unless Holmes locates the materials and begins construction work, and as of December 31, 2015, Holmes had not located the materials. According to US GAAP, does a contract exist for revenue recognition purposes, and why?