(Comprehensive Problem—Long-Term Contracts) You have been engaged by Buhl Construction Company to advise it concerning the proper accounting for a series of long-term contracts. Buhl commenced doing business on January 1, 2012. Construction activities for the first year of operations are shown below. All contract costs are with different customers, and any work remaining at December 31, 2012, is expected to be completed in 2013.

Project	Total Contract Price	Billings Through 12/31/12	Cash Collections Through 12/31/12	Contract Costs Incurred Through 12/31/12	Estimated Additional Costs to Complete
A	$ 300,000	$200,000	$180,000	$248,000	$ 72,000
B	350,000	110,000	105,000	67,800	271,200
C	280,000	280,000	255,000	186,000	–0–
D	200,000	35,000	25,000	118,000	87,000
E	240,000	205,000	200,000	190,000	10,000
Â	$1,370,000	$830,000	$765,000	$809,800	$440,200

Instructions

(a) Prepare a schedule to compute gross profit (loss) to be reported, unbilled contract costs and recognized profit, and billings in excess of costs and recognized profit using the percentage-of completion method.

(b) Prepare a partial income statement and balance sheet to indicate how the information would be reported for financial statement purposes.

(c) Repeat the requirements for part (a), assuming Buhl uses the completed-contract method.

(d) Using the responses above for illustrative purposes, prepare a brief report comparing the conceptual merits (both positive and negative) of the two revenue recognition approaches.