Tullis Construction enters into a long-term fixed price contract to build an office tower for $10,700,000.In the first year of the contract Tullis incurs $2,100,000 of cost and the engineers determined that the remaining costs to complete the project are $4,900,000. Tullis billed $4,000,000 in year 1 and collected $3,500,000 by the end of the end of the year. How much gross profit should Tullis recognize in Year 1 assuming the use of the completed-contract method?

1. $1,000,000
2. $1,900,000
3. $3,700,000
4. None of the above