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. General Electric Company estimated that its construction costs would be $840 million. The contract price of $1,050 million is to be paid as follows: $350 million at the time of signing; $350 million on December 31, 2016; and $350 million at completion in May 2017. General Electric incurred the following costs in constructing the generator: $336 million in 2016 and $504 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.
Enter dollar amounts in millions.

Cost-to-Cost Method
Year	Costs incurred	% of total excepted costs	Revenue recognized	Income
2016
2017
Total

Answer 1

Answer
Explanation :
Cost-to-Cost Method
Year	Costs incurred	% Total cost excepted costs	Revenue recognized	Income
2016	$              336	40% (336/840)	$420 ($1050 x 40%)	$                  84
2017	$              504	60% (504/840)	$630 ($1050x60%)	$                126
Total	$              840	100%	$                               1,050	$                210
Income in 2016 = 420-336 = 84
Income in 2017 = 630-504 = 126