The Koolman Construction Company began work on a contract in 2007. The contract price is $3,000,000, and the company uses the percentage-of-completion method. Other information relating to the contract is as follows:

Required
1. Compute the gross profit or loss recognized in 2007 and 2008.
2. Prepare the appropriate sections of the income statement and ending balance sheet for eachyear.

2007 2008 Costs incurred during the year Estimated costs to complete, December 31 Billings during the year Collections during the year $ 600,000 700,000 1,400000 200,000 850,000 800,000 500,000 400,000