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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?

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