Stellar Construction entered into a contract to build a commercial building for $3,600,000. Stellar Construction uses the percentage-of-completion method for recognizing revenue on the project. Construction began in September of 2018 and the building was completed in June of 2020. The company provided the following additional information on the project.

(1.) Prepare the journal entry for the income statement in each year of the project.

(2.) Prepare the necessary closing entry for the project in 2020.

Now assume that Stellar Construction uses the completed contract method for recognizing revenue.

(3.) How much gross profit is recognized in (a.) 2018, (b.) 2019, and (c.) 2020?

2018 2019 2020 Costs incurred to date $ 725,000 $ 2,100,000 $ 3,400,000 Estimated costs to complete $ 2,175,000 $ 1,400,000 $ Billings during the year $ 800,000 $ 1,650,000 $ 1,150,000 Cash collected during the year $ 450,000 $ 1,900,000 $ 1,200,000 2018 2019 2020 Costs incurred to date $ 725,000 $ 2,100,000 $ 3,400,000 Estimated costs to complete $ 2,175,000 $ 1,400,000 $ Billings during the year $ 800,000 $ 1,650,000 $ 1,150,000 Cash collected during the year $ 450,000 $ 1,900,000 $ 1,200,000