Construction Contracts Thompson Construction Company is involved in the construction of an electrical generating station for Whopper Electric Corp. The total project is expected to take 5 years to complete. The contract awarded to Thompson is $250,000,000, and the company expects the project to cost it $200,000,000. At the end of the first year of construction, Thompson has completed 20 percent of the total expected work, but based on costs incurred to date, it now expects its total cost for the project to be $215,000,000. At the end of the second year, 40 percent of the work has been completed, and Thompson estimates that its total costs under the contract will be

$210,000,000.

a. What amount of income will Thompson report for each of the first 2 years of the contract if it uses the percentage-ofcompletion method of computing income?

b. What amount of income will Thompson report in each of the 2 years if the completed-contract method is used?

c. Which method provides better information for evaluating the activities of Thompson Construction? Explain why.