Reference no: EM131643396

Question - Wind and water Energy Company hired smith corporation to build a new building for it's operations. Smith agreed to build the plant for $1,200,000, and wind and water energy agreed to pay smith $300,000 on January 1 and July 1, for two years beginning on July 1, 2006. Smith estimates that it will incur total costs of $950,000 to complete construction. The following exist at December 31, 2006:

Cost incurred to date $400,000

Estimated cost to complete $550,000

Billings to date $300,000

Collections to date $300,000

Calculate the amount of income that smith should recognize for 2006, using the percentage of completion method.