The Arcadia Company bid on a multiyear contract to construct the new hockey arena for the Phoenix Coyotes.

The contract required that construction begin not later than January 1, 2015, and be completed not later than December 31, 2017. Arcadia won the contract with a bid of \($720\) million. During the three-year period 2015 to 2017, the company incurred the following construction costs:

Under the terms of the contract, The Arcadia Company was entitled to bill the city of Glendale, Arizona, for 25 percent (\($180\) million) of the total bid upon completion of 30 percent of the planned project. Thus, at the end of 2015, and again at the end of 2016, Arcadia sent progress billings to, and was paid by, the City of Glendale in the amount of \($180\) million each year. At the end of 2017, after receiving all necessary occupancy approvals The Arcadia Company billed the City of Glendale for the remaining \($360\) million.
Required
Prepare income statements for The Arcadia Company for 2015, 2016, and 2017 assuming that the company recognizes revenue from the Coyote arena contract

(a) on the cash basis,

(b) on the completed contract basis, and

(c) on the percentage-of-completion basis.

Transcribed Image Text:

2015 Construction Costs $144 million 144 million Percentage of Project Completed 30% 30 2016 2017 192 million 40 Total $480 million 100%