During 2017, Darwin Corporation started a construction job with a contract price of $4.2 million. Darwin ran into severe technical difficulties during construction but managed to complete the job in 2019. The contract is non-cancellable. Under the terms of the contract, Darwin sends billings as revenues are earned. Billings are non- refundable. The following information is available:

Instructions
(a) Calculate the amount of gross profit that should be recognized each year under the percentage-of-completion method.
(b) Prepare the journal entries for 2018 to recognize the revenue from the contract, assuming the percentage-of- completion method is used. Explain the treatment of losses under the percentage-of-completion method.
(c) Calculate the amount of gross profit or loss that should be recognized each year under the completed-contract method. Explain the treatment of losses under the completed-contract method.

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2018 $ 600,000 $2,100,000 $4,100,000 2017 2019 Costs incurred to date Estimated costs to complete 3,150,000 2,100,000