Required:

1. Which method is most equivalent to recognizing revenue at the point of delivery? 2. Answer the following questions assuming that Citation uses the completed contract method for its office building contracts: 2-a. How much revenue related to this contract will Citation report in its 2018 and 2019 income statements? 2-b. What is the amount of gross profit or loss to be recognized for the Altamont contract during 2018 and 2019? 2-c. What will Citation report in its December 31, 2018, balance sheet related to this contract? (Ignore cash.)

Citation Bulders, 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. Fallure to pay the full amount results In forfelture of the down payment. Occasionally, homes remain unsold for as long as three months after construction. In these situations, sales price reductions are used to promote the sale During 2018, Citation began construction of an office bullding for Altamont Corporation. The total contract price Is $30 million. Costs Incurred, estimated costs to complete at year-end, billings, and cash collections for the life of the contract are as follows: 2018 2819 2828 Costs incurred during the year Estimated costs to complete as of year-end Billings during the year Cash collections during the year $ 6,e0,8e8 $14,258,8e8 6,75e,888 18,88e,8ee 3,80e,8ee 2,7ee,8e8 6,758,8ee 15,8ee,8ee 13,78e,880 12,8ee,88e 13,69e,880 Also during 2018, Citation began a development consisting of 12 Identical homes. Citation estimated that each home will sell for $1,000,000, but Individual sales prices are negotlated with buyers. Deposits were recelved for eight of the homes, three of which were completed during 2018 and pald for In full for $1,000,000 each by the buyers. The completed homes cost $750,000 each to construct. The construction costs Incurred during 2018 for the nine uncompleted homes totaled $4,500,000