Revenue Recognition At the beginning of 2016, John Cornell decided to quit his job as a construction company supervisor and formed his own residential housing construction company. When he resigned, he had a contract to build a custom home at a price of $400,000. The full price was payable in cash when the house was completed. By year-end 2016, Cornell's new company Luxury Homes, Inc. had spent $50,000 for labor, $107,740 for materials, and $3,800 in miscellaneous expenses in connection with the construction of the new home. Cornell estimated that the project was 70 percent complete at year-end. In addition, construction materials on hand at year-end 2016 had cost $2,600. During the year, Luxury Homes, Inc., had also purchased a small house for $95,000, spent $32,000 fixing it up, and then sold it on November 1, 2016, for $175,000. The buyer paid $25,000 down and signed a note for the remainder of the balance due. The note called for interest at a rate of 12 percent per year, with a lump- sum payment for the outstanding balance payable at the end of 2018. John's wife, Karen, kept the accounting records for Luxury Homes, Inc., and on December 31, she prepared the following statement