On January 1, 2015, assume that Dependable Construction Company agreed to construct a luxury residential complex for Heavenly Real Estate for $100 million. Heavenly Real Estate must pay $20 million upon signing, and $20 million each year at the end of 2015, 2016, 2017, and 2018. Expected costs of construction are $15 million for 2015, $40 million for 2016, $15 million for 2017, and $10 million in 2018, paid at the end of each year. Also assume that an appropriate interest rate for this contract is 8%. Amortization schedules for the deferred cash flows are as follows:

Amortization Schedule for Cash Received balance interest reduction balance year 1-Jan revenue payment in principal 31-Dec 2015 $66,242,536.80 $5,299,402.94 $20,000,000.00 $14,700,597.06 $51,541,939.74 2016 $51,541,939.74 $4,123,355.18 $20,000,000.00 $15,876,644.82 $35,665,294.92 2017 $35,665,294.92 $2,853,223.59 $20,000,000.00 $17,146,776.41 $18,518,518.52 2018 $18,518,518.52 $1,481,481.48 $20,000,000.00 $18,518,518.52 $0.00

Amortization Schedule for Cash Disbursed balance interest reduction balance year 1-Jan revenue payment in principal 31-Dec 2015 $67,440,223.84 $5,395,217.91 $15,000,000.00 $9,604,782.09 $57,835,441.75 2016 $57,835,441.75 $4,626,835.34 $40,000,000.00 $35,373,164.66 $22,462,277.09 2017 $22,462,277.09 $1,796,982.17 $15,000,000.00 $13,203,017.83 $9,259,259.26 2018 $9,259,259.26 $740,740.74 $10,000,000.00 $9,259,259.26 $0.00

a) Indicate the amount and nature of income (revenue and expense) that Dependable Construction Company would recognize for this contract during 2015, 2016, 2017, and 2018 if it uses the percentage-of-completion. Ignore income taxes. [10 points]

b) Using (b), indicate the amount and nature (revenue and expense) that Dependable Construction Company would recognize for this contract during 2015, 2016, 2017, and 2018 if it uses the installment method. Ignore income taxes. [10 points]