Tullis Construction enters into a long-term fixed price contract to build an office tower for $10,600,000. In the first year of the contract Tullis incurs $1,600,000 of cost and the engineers determined that the remaining costs to complete are $4,800,000. Tullis billed $3,600,000 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 percentage-of-completion method?

a. $0 b. $1,050,000

c. $2,650,000

d. $4,250,000