On June 15, 2016, Sanderson Construction entered into a long-term construction contract to build a baseball stadium in Washington, D.C., for $220 million. The expected completion date is April 1, 2018, just in time for the 2018 baseball season. Costs incurred and estimated costs to complete at year-end for the life of the contract are as follows ($ in millions): 2016 2017 2018 Costs incurred during the year $ 40 $ 80 $ 50 Estimated costs to complete as of December 31 120 60 — Required:
1. Compute the revenue and gross profit will Sanderson report in its 2016, 2017, and 2018 income statements related to this contract assuming Sanderson recognizes revenue over time according to percentage of completion?
2. Compute the revenue and gross profit will Sanderson report in its 2016, 2017, and 2018 income statements related to this contract assuming this project does not qualify for revenue recognition over time?
3. Suppose the estimated costs to complete at the end of 2017 are $80 million instead of $60 million. Compute the amount of revenue and gross profit or loss to be recognized in 2017 using the percentage of completion method?