Answer is bolded below. Please provide detailed explanation on how to solve this. Thank you.

Black Bear Construction Company has a contract to construct a $6,000,000 bridge at an estimated cost of $5,300,000. The contract is to start in July 2015, and the bridge is to be completed in October 2017. The following data pertain to the construction period.

	2015	2016	2017
Costs to date	$1,325,000	$3,780,000	$5,430,000
Estimated costs to complete	3,975,000	1,620,000
Progress billings during the year	1,200,000	3,200,000	1,600,000
Cash collected during the year	1,000,000	2,340,000	2,660,000

2. What amount of gross profit should Black Bear recognize in 2016 using the percentage-of-completion method?

$270,000

$245,000

$ 0

$315,000

3. What amount of gross profit should Black Bear recognize in 2017 using the percentage-of-completion method?

$150,000

$530,000

$169,000

$210,000