Power Rangers Company (PRC) agreed on June 15, 1992, to construct a nuclear generator for Consolidated Electric Company. The contract price of $200 million is to be paid as follows: at the time of signing, $20 million; on December 31, 1993, $100 million; and at completion on June 30, 1994, $80 million. Power Rangers incurred the following costs in constructing the generator: 1992, $42 million; 1993, $54 million; and 1994, $24 million. These amounts are according to original expectations.
(A) Compute the amount of revenue, expense, and net income for years 1992, 1993 and 1994 under the percentage-of-completion method.
(B) Repeat part (a) for the completed contract method.
(C) Repeat part (a) for the installment method.
(D) Repeat part (a) for the cost-recovery-first method.
(E) Which of the four methods above do you believe provides the best measure of PRC’s performance under the contract? Why?