Completed Contract Method versus Percentage-of-Completion Method
The Miller Company won a contract to build a shopping center at a price of $240 million. The following schedule details the estimated and actual costs of construction and the actual cash collections under the contract:
Estimated (Actual) Costs of Construction
Year 1: $40,000,000
Year 2: $60,000,000
Year 3: $70,000,000
Year 4: $30,000,000
Actual Cash Collections From Customer
Year 1: $48,000,000
Year 2: $60,000,000
Year 3: $60,000,000
Year 4: $72,000,000
Total Estimated Costs of Construction: $200,000,000
Total Actual Cash Collections From Customer: $240,000,000
Prepare an income statement for the Miller Company for each year assuming that the company recognizes revenue under the completed contract method.
Year 1
Year 2
Year 3
Year 4
Total
Revenue
Construction Cost
Net Income
Prepare an income statement for the Miller Company for each year assuming that the company recognizes revenue under the percentage-of-completion method.
Year 1
Year 2
Year 3
Year 4
Total
Revenue
Construction Cost
Net Income
