You have been engaged by Rich Mathre Construction Company to advise it concerning the proper accounting for a series of long-term contracts. Rich Mathre Construction Company commenced doing business on January 1, 2008. Construction activities for the first year of operations are shown below. All contract costs are with different customers, and any work remaining at December 31, 2008, is expected to be completed in 2009.

Instructions
(a) Prepare a schedule to compute gross profit (loss) to be reported, using the percentage-of-completion method.
(b) Repeat the requirements for part (a) assuming Rich Mathre uses the completed-contract method.
(c) Using the responses above for illustrative purposes, prepare a brief report comparing the conceptual merits (both positive and negative) of the two revenue recognitionapproaches.

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Estimated Collections Costs Incurred Additional Costs to Complete 67,000 271,.200 Contract Total Contract Billings 12/31/08 12/31/08 $180,000 $ 300,000 350,000 280,000 200,000 240,000 $1,370,000 12/31/08 $248,000 67,800 186,000 123,000 185,000 $809,800 $200,000 110,000 280,000 35,000 255,000 25,000 200,000 $765,000 87,000 15,000 $440,200 $830,000