In 2010, Tarlo Company agrees to construct a highway for Brice County over a three year period (2010 through 2012). The contract price is $1,200,000 and the construction costs (both actual and estimated) total $705,000 for the three years. The percentage completed at the end of each year is as follows: 2010, 20%; 2011, 75%; 2012, 100%.
Required:
1. Prepare a schedule showing the amount of gross profit that Tarlo Company recognizes each year using the percentage of completion method.
2. Prepare a schedule showing the amount of gross profit that Tarlo Company recognizes each year using the completed contract method.