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On March 15, 2010, Frankel Construction contracted to build a shopping center at a contract price of $120 million. The schedule of expected (equals actual) cash collections and contract costs follows:

Year Cash Collections Cost Incurred

2010 $30 million $15 million

2011 50 million 40 million

2012 40 million 30 million

Total $120 million $85 million

a. Calculate the amount of revenue, expense, and income for each of the three years 2010 through 2012 using (1) the percentage-of-completion method, (2) the completed contract method, and (3) the installment method.

b. Discuss which method you believe provides the best measure of the construction company's performance under this contract.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9400303

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