Constructing and Assessing Income Statements Using Cost-to-Cost Method Assume General Electric Company agreed in May 2016 to
Question:
Constructing and Assessing Income Statements Using Cost-to-Cost Method Assume General Electric Company agreed in May 2016 to construct a nuclear generator for NSTAR, a utility company serving the Boston area. The contract price of $750 million is to be paid as follows: $250 million at the time of signing; $250 million on December 31, 2016; and $250 million at completion in May 2017. General Electric incurred the following costs in constructing the generator: $240 million in 2016 and $360 million in 2017. a. Compute the amount of General Electric’s revenue, expense, and income for both 2016 and 2017, and for both years combined, under the cost-to-cost revenue recognition method. b. Discuss whether or not you believe the cost-to-cost method provides a good measure of General Electric’s performance under the contract.
Financial Accounting
ISBN: 9781618533111
6th Edition
Authors: Michelle L. Hanlon, Robert P. Magee, Glenn M. Pfeiffer, Thomas R. Dyckman