1. A construction company entered into a fixed-price contract to build an office building for $44 million. Construction costs incurred during the first year were $14 million and estimated costs to complete at the end of the year were $21 million. The building was completed during the second year. Construction costs incurred during the second year were $22 million.
How much gross profit will the company recognize in the first year and in the second year applying the completed contract method? (Enter your answers in whole dollars.)
2. On July 1, 2013, Apache Company sold a parcel of undeveloped land to a construction company for $4,900,000. The book value of the land on Apache's books was $1,960,000. Terms of the sale required a down payment of $245,000 and 19 annual payments of $245,000 plus interest at an appropriate interest rate due on each July 1 beginning in 2014. Apache has no significant obligations to perform services after the sale.
What should be the balance in the deferred gross profit account at the end of 2014 applying the installment sales method?