The Acme Construction Company contracted on May 15, 1979, to build a bridge for the city for \(\$ 4,500,000\). Acme estimated the cost of constructing the bridge would be \(\$ 3,600,000\). Acme incurred \(\$ 1,200,000\) in construction costs during 1979, \(\$ 2,000,000\) during 1980, and \(\$ 400,000\) during 1981 in completing the bridge. The city paid \(\$ 1,000,000\) during 1979 , \(\$ 1,500,000\) during 1980 , and the remaining \(\$ 2,000,000\) of the contract price at the time the bridge was completed and approved in 1981.

a Determine the net income (revenues less expenses) of Acme on the contract during 1979, 1980, and 1981, assuming that the percentage-of-completion method is used.

b Repeat part

a, assuming that the completed-contract method is used.

c Repeat part

a, assuming that the cash collection (installment) method is used.

d Repeat part

a, assuming that the cash collection (cost-recovery-first) method is used.

e Which method do you feel provides a better measure of Acme's performance under this contract? Why?

f Under what circumstances would the method not selected in part e provide a better measure of performance?