Cannon Construction (Cannon or the “Company”), an SECregistrant, is a construction company that manufactures commercialand residential buildings. On March 1, 2017, the Company enteredinto an agreement with a customer, Thornock Square Apartments, toconstruct a residential apartment building for a fixed price of$1.5 million. The Company estimates that it will incur costs of $1million to complete construction of the apartment building. Theapartment building will only transfer to Thornock Square Apartmentsonce the construction of the entire building is complete. Inaddition, Thornock Square Apartments has various designrequirements that would require Cannon to incur significant coststo rework the building prior to selling it to a customer other thanThornock Square Apartments.
To construct the apartment building, Cannon acquires standardmaterials that it regularly uses in construction contracts for bothresidential and commercial buildings. These materials are used tomanufacture generic component parts for inclusion in ThornockSquare Apartments’ residential buildings. These standard materialsremain interchangeable with other items until they are deployed inThornock Square Apartments building. The Company has made thefollowing purchases and incurred the following costs throughout theconstruction progress:
A. As of June 30, 2017, in total, Cannon has purchased $75,000 ofcomponent parts. As of June 30, 2017, $25,000 of component partsremain in inventory and $50,000 have been integrated into theproject. Further, Cannon has incurred $12,500 of direct costs tointegrate the component parts into the Thornock Square Apartmentsconstruction project during the three months ended June 30,2017.
B. During the three months ended September 30, 2017, Cannonpurchased an additional $500,000 of component parts ($575,000 intotal). Of the $575,000 of component parts, $325,000 remain ininventory and $200,000 have been integrated into the project duringthe three months ended September 30, 2017. During the three monthsended September 30, 2017, Cannon incurred an additional $50,000 ofdirect costs to integrate the component parts into the ThornockSquare Apartments construction project.
C. As of September 30, 2017, Cannon determined that the project wasover budget and revised its cost estimate from $1 million to $1.25million.
D. As of December 31 2017, the construction project was completed.During the three months ended December 31, 2017, Cannon purchasedan additional $425,000 of generic component parts ($1 million intotal). Of the $1 million component parts, $0 remain in inventoryand $750,000 were integrated into the project during the threemonths ended December 31, 2017. Cannon has incurred $187,500 ofdirect costs to integrate the component parts into the ThornockSquare Apartments construction project during the three monthsended December 31, 2017.
If Thornock Square Apartments cancels the contract, Cannon will beentitled to reimbursement for costs incurred for work completed todate plus a margin of 20 percent, which is considered to be areasonable margin. Cannon will not be reimbursed for any materialsthat have been purchased for use in the contract but have not yetbeen used and are still controlled by Cannon.

Question from scenario:

1)Does the performance obligation meet any of the criteria forrecognition of revenue over time? Discuss which criteria (if any)is met and how is met.

2)How should the entity recognize revenue for the satisfactionof its performance obligation? What amount of revenue should berecognized for the following periods: a. The three months endedJune 30, 2017? b. The three months ended September 30, 2017? c. Thethree months ended December 31, 2017?

3) create a schedule summarizing your calculations to arrive atrevenue to be recognized each year.