The Freddy Construction Corporation (MCC) signed a $15 million contract in late 20x0 to build

a road. Data on the contract is as follows:

20x1 20x2 20x3 20x4

Costs incurred during year $3,000,000 $6,500,000 $4,000,000 $3,200,000

Expected costs to complete 9,000,000 5,000,000 3,100,000 -

Billings 7,500,000 - - 7,500,000

Required

For each of the parts below, prepare the mini income statement for the project for each year and

calculate the net investment of the project that will be shown on the balance sheet at the end of

each year.

a. Freddy uses an input based approach to calculating the percentage of completion.

b. Freddy uses an output based approach to calculating the percentage of completion and

has calculated the percentages of completion as follows:

20x1 20%

20x2 65%

20x3 85%

20x4 100%