ES-36. Constructing and Assessing Income Statements Using Cost-to-Cost Method On March 15, 2019, Gilbert Construction contracted to
Question:
ES-36. Constructing and Assessing Income Statements Using Cost-to-Cost Method On March 15, 2019, Gilbert Construction contracted to build a shopping center at a contract price of $220 million. The schedule of expected (which equals actual) cash collections and contract costs follows.
Year Cash Collections Cost Incurred 2019 . . .. . $ 55 million $ 36 million 2020 ..... 88 million 81 million 2021 ..... 77 million 63 million Total ..... $220 million $180 million
a. Calculate the amount of revenue, expense, and net income for each of the three years 2019 through 2021, and for all three years combined, using the cost-to-cost revenue recognition method.
b. Discuss whether or not the cost-to-cost method provides a good measure of this construction company's performance under the contract.
Step by Step Answer:
Financial Statement Analysis And Valuation
ISBN: 9781618533609
6th Edition
Authors: Peter D. Easton, Mary Lea Mcanally, Gregory A. Sommers