In Spring 2017, Bava Construction signed a contract with the city of Springfield, to construct a new city hall for $200 million. Bava expects to construct the building within two years and incur expenses of $150 million, which means the company earns a $50 million profit on the contract. The city of Springfield paid $50 million when the contract was signed, $100 million within the next six months, and the final $50 million exactly one year from the signing of the contract. Bava incurred $60 million in costs during 2017 and rest in 2018 to complete the contract on time.
Using the cost-to-cost method how much revenue should Bava recognize in 2017? What profit from the Springfield contract, will the company report each year?

Question

In Spring 2017, Bava Construction signed a contract with the city of Springfield, to construct a new city hall for $200 million. Bava expects to construct the building within two years and incur expenses of $150 million, which means the company earns a $50 million profit on the contract. The city of Springfield paid $50 million when the contract was signed, $100 million within the next six months, and the final $50 million exactly one year from the signing of the contract. Bava incurred $60 million in costs during 2017 and rest in 2018 to complete the contract on time. 
Using the cost-to-cost method how much revenue should Bava recognize in 2017? What profit from the Springfield contract, will the company report each year?

Quizplus · Accepted Answer

The Answer of In Spring 2017, Bava Construction signed a contract with the city of Springfield, to construct a new city hall for $200 million. Bava expects to construct the building within two years and incur expenses of $150 million, which means the company earns a $50 million profit on the contract. The city of Springfield paid $50 million when the contract was signed, $100 million within the next six months, and the final $50 million exactly one year from the signing of the contract. Bava incurred $60 million in costs during 2017 and rest in 2018 to complete the contract on time. 
Using the cost-to-cost method how much revenue should Bava recognize in 2017? What profit from the Springfield contract, will the company report each year?

In Spring 2017, Bava Construction Signed a Contract with the City