Trillium Construction Company is a publicly traded company that began a long-term government contract on July 1, 2019 to build a housing complex for the price of $8,000,000. The construction was expected to take 24 months to complete.

a. For the year ended December 31, 2019, Trillium incurred construction costs of $1,300,000 and it was estimated that an additional $3,900,000 in costs would needed to complete the contract. Trillium billed the government $2,000,000 during the first year and collected $1,000,000 by December 31, 2019. Trillium uses the percentage-of-completion method of revenue recognition. Calculate the gross profit to be recognized for the year ended December 31, 2019.

b. Then, for the year ended December 31, 2020, Trillium incurred construction costs of $3,180,000 and at that point, it was estimated that an additional $1,120,000 in costs would be needed to complete the contract. Trillium billed the government $4,000,000 during the second year and collected $4,500,000 by December 31, 2020. Continuing to use the percentage-of-completion method of revenue recognition, calculate the revenue recognized for the year ended December 31, 2020.

c. The CEO of Trillium has heard that the completed-contract method is easier to use than the percentage-of-completed method. Briefly explain to the CEO (approximately 1 or 2 sentences) why Trillium should or should not adopt the completed contract method.