Constructing and Assessing Income Statements Using Percentage-of Completion

Constructing and Assessing Income Statements Using Percentage-of Completion

Constructing and Assessing Income Statements Using Percentage-of Completion
On March 15, 2012, Frankel Construction contracted to build a shopping center at a contract price of $120 million. The schedule of expected (which equals actual) cash collection and contract costs follow ($ millions):

Year Cash Collections Cost Incurred
2012 $ 30 $ 25
2013 50 20
2014 40
40
Total $ 120 $ 85

(a) Calculate the amount of revenue, expense, and net income for each of the three years 2012 through 2014 using the percentage-of-completion revenue recognition method. Rounding instructions: Round percentages to the nearest whole number. Use rounded percentages for remaining calculations. Round revenue and income to the nearest whole number.

Percentage of Completion Method
Year Costs incurred Percent of total expected costs Revenue recognized Income
2012 $
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mba_600.docx