Use the following information for the next three questions:

Information on Red Hot Co.s construction contracts with customers which commenced during 2021 is shown below:

	Contract 1	Contract 2
Contract price	420,000	300,000
Costs incurred during the year	240,000	280,000
Estimated costs to complete	120,000	40,000
Progress billings	150,000	270,000
Collections	90,000	250,000

1. At contract inception, Red Hot Co. assessed that its performance obligation in each of Contract 1 and Contract 2 is satisfied over time. Red Hot Co. uses the cost-to-cost method in measuring its progress on the contract. How much total profit (loss) is recognized from the two contracts in 2021?

1. 40,000
2. 20,000
3. (20,000)
4. 0

2. At contract inception, Red Hot Co. assessed that its performance obligation in each of Contract 1 and Contract 2 is satisfied over time. However, Red Hot Co. determined that the outcome of the performance obligation in each of the contracts cannot be reasonably measured but contract costs incurred are recoverable. How much total profit (loss) is recognized from the two contracts in 2021?

1. 40,000
2. 20,000
3. (20,000)
4. 0

3. At contract inception, Red Hot Co. assessed that its performance obligation in each of Contract 1 and Contract 2 is satisfied at a point in time, that is, when the construction is completed. How much total profit (loss) is recognized from the two contracts in 2021?

1. 40,000
2. 20,000
3. (20,000)
4. 0