Samson Construction Company is a small business that constructs buildings. Usually the time for Samson to complete the construction of a building is about six months. At the beginning of this year, Samson signed a contract to build a three-storey office building at a selling price of \(\$ 2000000\). Samson will collect this amount when it completes construction of the building. Because this is a larger building than it usually builds, Samson expected that it would take two years to complete the construction, at a total cost of \(\$ 1400000\). This is the only building that Samson worked on during the year. By the end of the year construction was on schedule: the office building was half complete and Samson had paid \(\$ 700000\) costs. At this time Samson's bookkeeper came to Bill Samson, the owner, and said, 'Samson Construction Company didn't do very well this year; it had a net loss of \(\$ 700000\) because its revenue was zero and its expenses were \(\$ 700000\).'

Bill comes to you for advice. He says, 'Usually, my company records the revenue and related expenses for constructing a building when it is completed. However, this three-storey building will take much longer than usual. My construction crews have already been working on the building for one year and will continue to work on it for another year. My company has paid for one year's worth of salaries, materials and other costs, and will continue to pay for all of these costs incurred next year, so a lot of money will be tied up in the contract and won't be recovered until my company collects the selling price when the building is completed. How and when should my company record the revenue and expenses on this building? Do I really have a \(\$ 700000\) net loss for the current year?' Required:

Prepare a written answer to Bill Samson's questions.