Question
6) Complete the problem below on the Percentage of Completion (Cost to Cost) method for recognizing revenue over multi-year contracts. Assume General Electric Company agreed
6) Complete the problem below on the Percentage of Completion (Cost to Cost) method for recognizing revenue over multi-year contracts. Assume General Electric Company agreed in May 2016 to construct a nuclear generator for NSTAR, a utility company serving the Boston area. The contract price awarded to GE is for $750 million total to be paid out in cash installments during the contract. GE expects to incur $600 million in total costs constructor the generator and more specifically $240 million in 2016 and $360 million in 2017. Answer questions a)-c) below: a) Compute the amount of GEs revenue, expense and net income for both 2016 and 2017 and for combined 2 year period under the %o of completion/ cost to cost revenue recognition method.b) Why would GE want to use this method for recognizing revenue? c) What risks to you foresee with this method?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started