You own a construction company and have recently received a contract with the local school district to refurbish one of its elementary schools. You are given an up-front payment from the school district in the amount of $5 million. The contract terms extend from years 2018 to 2020.
• When would you recognize revenue for this payment?
• What method of accounting would you use for this construction project and why?
• What would be the benefits and challenges with your method selection?
• Give an example of your distribution selection and associated costs of the project (you may estimate based on other industry competitors).
• What might be some benefits and challenges associated with the other method of construction revenue recognition?