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.

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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