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On March 15, 2010, Frankel Construction contracted to build a shopping center at a contract price of $120 million. The schedule of expected (equals...

On March 15, 2010, Frankel Construction contracted to build a shopping center at a contract price of $120 million. The schedule of expected (equals actual) cash collections and contract costs follows:

Year Cash Collections Cost Incurred

2010 $30 million $15 million

2011 50 million 40 million

2012 40 million 30 million

Total $120 million $85 million



a. Calculate the amount of revenue, expense, and income for each of the three years 2010 through 2012 using (1) the percentage-of-completion method, (2) the completed contract method, and (3) the installment method.

b. Discuss which method you believe provides the best measure of the construction company's performance under this contract.
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8422084.xls

(Value in million $) Contract value 2010 2011 2012 120 Cash collected incurred Cost 30 15 50 40 40 30 (1) Percentage of completion method 2010 2011 % Complete 17.65% 64.71% Revenue Expense Income...

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