On March 15, 2007, Frankel Construction contracted to build a shopping center at a contract price of \(\$ 120\) million. The schedule of expected (which equals actual) cash collections and contract costs follows:

a. Calculate the amount of revenue, expense, and net income for each of the three years 2007 through 2009 using the percentage-of-completion revenue recognition method.

b. Discuss whether or not the percentage-of-completion method provides a good measure of this construction company's performance under the contract.

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Year Cash Collections 2007..... $ 30 million 2008..... 50 million 2009..... 40 million Total $120 million Cost Incurred $15 million 40 million 30 million $85 million