Shanahan Construction Company has entered into a contract beginning January 1, 2019, 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.

Instructions

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

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