BOSS 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 $1,500,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $2,250,000. The following data pertain to the construction period.

2019 2020 2021

Costs to date $675,000 $1,125,000 $1,525,000

Estimated costs to complete 825,000 375,000 0

Progress billings to date 675,000 1,375,000 2,250,000

Cash collected to date 600,000 1,250,000 2,250,000

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.