Also during 2024, Citation began a development consisting of 12 identical homes. Citation estimated that each home will sell for $660,000, but individual sales prices are negotiated with buyers. Deposits were received for eight of the homes, three of which were completed during 2024 and paid for in full for $660,000 each by the buyers. The completed homes cost $495,000 each to construct. The construction costs incurred during 2024 for the nine uncompleted homes totaled $2,970,000.

Required:

1. Which method is most equivalent to recognizing revenue at the point of delivery?

2. Answer the following questions, assuming that Citation concludes it does not qualify for revenue recognition over time for its office building contracts:

2-a. How much revenue related to this contract will Citation report in its 2024 and 2025 income statements?

2-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2024 and 2025?

2-c. What will Citation report in its December 31, 2024, balance sheet related to this contract? (Ignore cash.)

3. Answer the following questions assuming that Citation recognizes revenue over time according to percentage of completion for its office building contracts.

3-a. How much revenue related to this contract will Citation report in its 2024 and 2025 income statements?

3-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2024 and 2025?

3-c. What will Citation report in its December 31, 2024, balance sheet related to this contract?(Ignore cash.)

4. Assume the same information for 2024 and 2025, but that as of year-end 2025 the estimated cost to complete the office building is $5,400,000. Citation recognizes revenue over time according to percentage of completion for its office building contracts.

4-a. How much revenue related to this contract will Citation report in the 2025 income statement?

4-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2025?

4-c. What will Citation report in its 2025 balance sheet related to this contract?(Ignore cash.)

5. Which method of accounting should Citation Builders, Incorporated adopt for its single-family houses?

6. What will Citation report in its 2024 income statement and 2024 balance sheet related to the single-family home business (ignore cash in the balance sheet)?