Problem

On March 1, 2014, Pechstein Construction Company contracted to construct a factory building for Fabrik Manufacturing Inc. for a total contract price of $8,400,000. The building was completed by October 31, 2016. The annual contract costs incurred, estimated costs to complete the contract, and accumulated billings to Fabrik for 2014, 2015, and 2016 are given below.

                                                                                 2014                    2015                    2016
Contract costs incurred during the year                     $2,880,000           $2,230,000           $2,190,000
Estimated costs to complete the contract at 12/31     3,520,000             2,190,000              -0-
Billings to Fabrik during the year                               3,200,000             3,500,000              1,700,000

Instructions

(a) Using the percentage-of-completion method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2014, 2015, and 2016.

(b) Using the completed-contract method, prepare schedules to compute the profit or loss to be recognized as a result of this contract for the years ended December 31, 2014, 2015, and 2016.