Shanahan Construction Company has entered into a contract beginning January 1, 2020, to build a parking complex. IT has been estimated that the complex will cost $600,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $900,000. The following data pertain to the construction period. 2014 2015 2016
Costs to date $270,000 $450,000 $610,000
Estimated costs to complete 330,000 150,000 –0–
Progress billings to date 270,000 550,000 900,000
Cash collected to date 240,000 500,000 900,000

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

i. Gross profit recognized in 2014: $ 135,000
ii. Gross profit recognized in 2015: $ 90,000
iii. Gross profit recognized in 2016: $ 65,000

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

i. Gross profit recognized in 2014: $ 0
ii. Gross profit recognized in 2015: $ 0
iii. Gross profit recognized in 2016: $ 290,000