A Construction Firm Enters a Long-Term Contract to Build a Bridge.The

question 12

Short Answer

A construction firm enters a long-term contract to build a bridge.The expected and actual cash receipts and disbursements for the project are as follows:
$\begin{array}{lll}\text { Period } & \text { Receipts } & \text { Expenditures }\\1 & \$ 1,000 & \$ 4,000 \\2 & 2,000 & 2,000 \\3 & 3,000 & 1,000 \\4 & 4,000 & 1,000\end{array}$ Required:
What is the income before taxes during each of the following periods under each of the specified methods of revenue recognition?
$\begin{array}{lll} &\text { Period }&\text { Method }\\\text { a. } & 1 & \text { Completed Contract } \\\text { b. } & 4 & \text { Completed Contract } \\\text { c. } & 1 & \text { Percentage of Completion } \\\text { d. } & 4 & \text { Percentage of Completion } \\\text { e. } & 1 & \text { Installment Method } \\\text { f. } & 4 & \text { Installment Method } \\\text { g. } & 1 & \text { Cost Recovery First } \\\text { h. } & 4 & \text { Cost Recovery First }\end{array}$

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