Income recognition for a nuclear generator manufacturer. General Electric Company agreed on June 15. Year 2. to construct a nuclear generator for Consolidated Edison Company.

The contract price of S200 million is to be paid as follows: at the time of signing. S20 million:

on December 31. Year 3. SI 00 million: and at completion on June 30. Year 4, $80 million. General Electric Company incurred the following costs in constructing the generator: Year 2. S42 million: Year 3. S54 million: and Year 4. S24 million. These amounts conformed to original expectations.

a. Calculate the amount of revenue, expense, and income before income taxes for Year 2.

Year 3. and Year 4 under each of the following revenue recognition methods:

( 1 ) Percentage-of-completion method

(2) Completed contract method

(3) Installment method

(4) Cost-recovery-first method

b. Which method do you believe provides the best measure of General Electric Company's performance under the contract? Why?