Concord Construction Inc. agreed to build a new science building on the Northern University campus. Both parties signed the contract on October 31, 2011, for $60 million, which is to be paid as follows:
$5 million at the signing of the contract
$15 million on December 31, 2011
$30 million on December 31, 2012
$10 million at completion, on August 15, 2013
The following costs were incurred by Concord Construction (in millions):
2011…………………….. $ 9.2
2012…………………….. 20.4
2013…………………….. 16.4
Total……………………..$46.0
Required:
a. Calculate the revenue, expenses, and profit (ignoring interest) that Concord Construction should report for each of the three years, using the percentage of completion method.
b. Explain how this method appropriately allows Concord Construction to show the company's performance under the contract.