Using Percentage-of-Completion and Completed Contract Methods Halsey Building Company signed a contract to build an office building for $40,000,000. The scheduled construction costs follow. Year Cost 2019 $9,000,000 2020 15,000,000 2021 6,000,000 Total $30,000,000 The building is completed in 2021. For each year, compute the revenue, expense, and gross profit reported for this construction project using each of the following assumptions: a. Halsey's performance obligation to build the office building is fulfilled as construction proceeds, and the cost incurred is an accurate reflection of the value transferred to the customer. 2019 2020 2021 Revenue $ 12,000,000 $ 20,000,000 $ 8,000,000 Expense $ 9,000,000 $ 15,000,000 $ 6,000,000 Gross Profit $ 3,000,000 $ 5,000,000 $ 2,000,000 b. Halsey's contract does not transfer ownership rights to the customer until the building is completed. 2019 2020 2021 Revenue $ $ 0 $ 40,000,000 Expense $ 9,000,000 x $ 15,000,000 X 6,000,000 x Gross Profit $ 9,000,000 * $ 15,000,000 X 34,000,000 x Analyzing Unearned Revenue Liabilities The Metropolitan Opera Association, Inc., was founded in 1883 and is widely regarded as one of the world's greatest opera companies. The Metropolitan's performance run from September to May, and the season may consisted of more than two dozen different operas. Many of the opera's loyal subscribers purchase tickets for the upcoming season prior to the end of the opera's fiscal year end at July 31. In its annual report, the Metropolitan recognizes a Deferred Revenue liability that is defined in their footnotes as follows. "Advance ticket sales, representing the receipt of payments for ticket sales for the net opera season, are reported as deferred revenue in the consolidated balance sheets." Ticket sales are recognized as box office revenue "on a specific performance basis." Fiscal year Revenues ended July 31 (Box office and tours) Deferred revenue 2017 $88,514 $ 42,649 2016 87,582 46,609 2015 90,952 47,801 2014 91,319 40,259 Recreate the summary journal entries to recognize ticket sales (box office and tours) for The Metropolitan Opera's fiscal year 2017 and advance sales for the fiscal year 2018 season. (Assume that advance ticket sales extend no further than the next year's opera season.) General Journal Debit Credit Description Deferred revenue 46,609 0 Cash 46,609 X 0 Revenues A 0 88,514 7 To record revenue for 2017 season. Cash 42,649 0 Deferred revenue 0 42,649 To record advance purchases for 2018 season