Finance Masters
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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