Constructing and Assessing Income Statements Using Percentage-of-Completion (LO1) Assume that General Electric Company agreed in May 2013
Question:
Constructing and Assessing Income Statements Using Percentage-of-Completion (LO1) Assume that General Electric Company agreed in May 2013 to construct a nuclear generator for NSTAR, a utility company serving the Boston area. The contract price of \(\$ 600\) million is to be paid as follows: \(\$ 200\) million at the time of signing; \$200 million on December 31, 2013; and \$200 million at completion in May 2014. General Electric incurred the following costs in constructing the generator: \(\$ 200\) million in 2013, and \$300 million in 2014.
a. Compute the amount of General Electric's revenue, expense, and income for both 2013 and 2014 under the percentage-of-completion revenue recognition method.
b. Discuss whether or not you believe the percentage-of-completion method provides a good measure of General Electric's performance under the contract.
Step by Step Answer:
Financial And Managerial Accounting For MBAs
ISBN: 9781618533593
6th Edition
Authors: Peter D. Easton