Star Construction Corporation has a contract to construct a building for $$10,950,000.$ The building is controlled by the customer throughout the term of the contract. Total costs to complete the building were originally estimated at $$8,850,000.$ Construction commenced on $4$ February $205.$ Actual costs were in line with estimated costs for $205$ and $206.$ In $207,$ actual costs exceeded estimated costs by $$150,000.$

Total construction costs incurred in each year were as follows:

$20$X$5$: $$2,700,000$

$20$X$6$: $$4,500,000$

$20$X$7$: $$1,800,000$

Progress billings based on the amount of work completed were collected each year. Star Construction uses the percentage$-$of$-$completion method. The percentage$-$of$-$completion is based on costs incurred compared with estimated total costs of the project.

Company also billed the client and collected the following payments

Year

Billings

Payments Received

$20$X$5$:

$$2,300,000$

$$2,100,000$

$20$X$6$:

$$4,900,000$

$$4,700,000$

$20$X$7$:

$$3,750,000$

$$4,150,000$

$$

Required: $(12$ Marks$)$ Calculate Net income for the construction project for each of the three years:

a$)$ Completed contract method?

$20$X$5$: $$\_\_\_\_\_\_\_\_\_\_\_\_\_\_20$X$6$: $$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_20$X$7\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.$

b$)$ Percentage$-$of$-$completion method? $($basis: estimated costs to complete$)$

$20$X$5$: $$\_\_\_\_\_\_\_\_\_\_\_\_\_\_20$X$6$: $$\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_20$X$7\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.$

$$