Part 1: Delaney Builders, Inc., builds office buildings and single-family homes. The office buildings are constructed under contract with reputable buyers. During 2018, Delaney began construction of an office building for Grant Corporation. The total contract price is $22 million. Costs incurred, estimated costs to complete at year-end, billings, and cash collections for the life of the contract are as follows: 2018 $3,600,000 Costs incurred during the year 2019 $8,550,000 2020 $4,050,000 10,800,000 4,050,000 Estimated costs to complete as of year-end Billings during the year Cash collections during the year 1,800,000 1,620,000 9,000,000 7,580,000 7,200,000 8,800,000 Required: 1. Which method is most equivalent to recognizing revenue at the point of delivery? 2. Answer the following questions assuming that Delaney uses the completed contract method for its office building contracts: a. How much revenue related to this contract will Delaney report in its 2018 and 2019 income statements? b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019? 3. Answer the following questions assuming that Delaney uses the percentage-of-completion method for its office building contracts. a. How much revenue related to this contract will Delaney report in its 2018 and 2019 income statements? b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019? Part 2: Baker, a consulting firm, enters into a contract to help a small family owned business design a marketing strategy to compete with other companies in the region. The contract spans eight months. Baker's client promises to pay $93,000 at the beginning of each month. At the end of the contract, Baker either will give their client a refund of $31,000 or will be entitled to an additional $31,000 bonus, depending on whether sales at Burger Boy at year-end have increased to a target level. At the inception of the contract, Baker estimates an 80% chance that it will earn the $31,000 bonus and calculates the contract price based on the expected value of future payments to be received. At the end of the contract, Baker receives the additional consideration of $31,000. Required: 1. Prepare the journal entry to record revenue for the first four months of the contract. 2. Prepare the journal entry that Baker would record after eight months to record the receipt of the $31,000 bonus. Part 1: Delaney Builders, Inc., builds office buildings and single-family homes. The office buildings are constructed under contract with reputable buyers. During 2018, Delaney began construction of an office building for Grant Corporation. The total contract price is $22 million. Costs incurred, estimated costs to complete at year-end, billings, and cash collections for the life of the contract are as follows: 2018 $3,600,000 Costs incurred during the year 2019 $8,550,000 2020 $4,050,000 10,800,000 4,050,000 Estimated costs to complete as of year-end Billings during the year Cash collections during the year 1,800,000 1,620,000 9,000,000 7,580,000 7,200,000 8,800,000 Required: 1. Which method is most equivalent to recognizing revenue at the point of delivery? 2. Answer the following questions assuming that Delaney uses the completed contract method for its office building contracts: a. How much revenue related to this contract will Delaney report in its 2018 and 2019 income statements? b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019? 3. Answer the following questions assuming that Delaney uses the percentage-of-completion method for its office building contracts. a. How much revenue related to this contract will Delaney report in its 2018 and 2019 income statements? b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019? Part 2: Baker, a consulting firm, enters into a contract to help a small family owned business design a marketing strategy to compete with other companies in the region. The contract spans eight months. Baker's client promises to pay $93,000 at the beginning of each month. At the end of the contract, Baker either will give their client a refund of $31,000 or will be entitled to an additional $31,000 bonus, depending on whether sales at Burger Boy at year-end have increased to a target level. At the inception of the contract, Baker estimates an 80% chance that it will earn the $31,000 bonus and calculates the contract price based on the expected value of future payments to be received. At the end of the contract, Baker receives the additional consideration of $31,000. Required: 1. Prepare the journal entry to record revenue for the first four months of the contract. 2. Prepare the journal entry that Baker would record after eight months to record the receipt of the $31,000 bonus