On January 1, 2020, ABC Company entered into a contract to build a spacious apartment for DEF Company for a total contract price of $5,000,000. DEF Company will make annual payments to ABC Company but the amount of these payments cannot exceed the direct costs incurred by ABC Company.

The construction contract provided DEF Company with a final inspection right to ensure compliance with the contract terms prior toaccepting the completed project.

It had been the accounting policy for ABC Company to use percentage of completion method to compute construction revenue andgross profit.

On January 1, 2022, ABC Company implemented an accounting change from percentage of completion method to zero profit or costrecovery method.

The following data were provided by ABC Company for the years ended December 31, 2020, 2021 and 2022:

2020 2021 2022 Costs incurred each year 1,450,000 2,600,000 600,000 Estimated cost to complete at year-end 3,150,000 400,000 - Progress billings each year 400,000 2,000,000 2,600,000 Progress payment received each year 275,000 2,100,000 2,625,000 The costs incurred for each year are inclusive of the following actual marketing expense and general administrative costs which are not reimbursable under the construction contracts: 2020 2021 2022 Marketing expense 70,000 200,000 120,000 General administrative costs 30,000 150,000 80,000