Citation builders inc builds office buildings and single family homes. The office buildings are constructed under contract with reputable buyers. The homes are constructed in developments ranging from 10-20 homes and are typically sold during construction or soon after. To secure the home upon completion, buyers must pay a deposit of 10% of the price of the home with the remaining balance due upon completion of the house and transfer of title. Failure to pay the full amount results in fortfeture of the down payament. Sometimes homes remain unsold for as long as 3 months after construction. In these situations, sales price reductions are used to promote sale. During 2016, citation began construction of an office building for Altamont corporation the total contract price is 20 million cost incurred, estitmated costs to complete at the year end billings and cash collections for the life of the contract are as follows:

2016 12017 2018

Cost incurred during the year 4,000,000 9,500,000 4,500,000

Estimated costs to complete as of year end 12,000,000 4,500,000

Billings during the year 2,000,000 10,000,000 8,000,000

Cash collections during the year 1,800,00 8,600,000 9,600,000

Also during 2016, citation began development consisting of 12 identical houses. Citattion estimated that each home will sell for 600,000 but individual sales are negotiated with buyers deposits were received for 8 of the homes three of which were completed during 2016 and paid for in full for 600,000 each by the buyers. The completed homes cost 450,000 each to contract the construction incurred during 2016 for the 9 incomplete houses totaled 2,700,000

Required

1. Briefly ecxplain yhe difference between recognizing revenue over time and upon completion when accounting for long-term construction contracts

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

a. How much revenue related to this contract will citation report in its 2016 2017 income statements?

b.What is the amount of gross profit or loss to be recognized for the Altamont contract during 2016 and 2017?

c.What will citation report in its dec 31 2016 balance sheet related to this contract (ignore cash)

3. Answer requirments 2a and 2c assuming that cit. recognizes revenue over time according to percentage of completion for its office buildings contract

4.Assume the same information is for 2016 and 2017, but as of year end 2017 the estimated cost to complete the office bilding was 9,000,000 cit. recognizes revenue over time according to percentage of completion for its office building contracts

a.How much reveue related to this contract will cit report in the 2017 income statement

b.What is the amount of the gross profit or loss to be recognized for the Altamont contract during 2017

c.What will citation report in 2017 balance sheet related to this contract (ignore cash)1.