Question

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 $1,500 million is to be paid as follows: $500 million at the time of signing; $500 million on December 31, 2016; and $500 million at completion in May 2017. General Electric incurred the following costs in constructing the generator: $480 million in 2016 and $720 million in 2017.

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.

Answer 1

Step-by-step explanation:

The computation is shown below:

(A) (B) C = $1,500 × B D = C - A

Year Cost incurred Percentage Contract price Income

Or revenue recognized

2016 $480 million 40% $600 million $120 million

2017 $720 million 60% $900 million $180 million

Total $1,200 million 100% $1,500 million $300 million