Jebali Corporation, a calendar year taxpayer utilizing the completed contract method of accounting, constructed a building for Samson, Inc., under a long-term contract. The gross contract price was $4,991,500. Jebali finished construction in 2023 at a cost of $4,492,350. However, Samson insisted that Jebali redo the doorway; otherwise, the contract price would be reduced. The estimated cost of redoing the doorway is $88,800. In 2024, the dispute is settled and Jebali fixed the doorway at a cost of $71,040.

a. How much must Jebali include in gross income for these items? What amount of deductions is Jebali allowed for 2023?

Jebali must include $fill in the blank 1 in gross income and is allowed deductions of $fill in the blank 2 for 2023.

b. In 2024, how much must Jebali include in gross income? What expenses can Jebali deduct in that year?

In 2024, Jebali must include $fill in the blank 3 in gross income and may deduct $fill in the blank 4 as expense in that year.