On March 1, 2019, Pechstein Construction Company contracted to construct a factory building for Fabrik Manufacturing Inc. for a total contract price of $8,400,000. The building was completed by October 31, 2021. The annual contract costs incurred, estimated costs to complete the contract, and accumulated billings to Fabrik for 2019, 2020, and 2021 are given below.

Instructions

a. Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2019, 2020, and 2021. (Ignore income taxes.)

b. Using the cost-recovery method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2019, 2020, and 2021. (Ignore incomes taxes.)