Assume Nortel Networks contracted to provide a customer with Internet Infrastruc

Question

Assume Nortel Networks contracted to provide a customer with Internet Infrastructure for $2600,000. The project began In 2018 and was completed In 2019. Data relating to the contract are summarized below: 2018 2819 Costs incurred during the year Estimated costs to complete as of 12/31 Billings during the year Cash collections during the year $ 348,90e $1,995,8ee 1, 392,8ee 465,888 1,748,888 274,808 1,818,888 Requlrec 1. Compute the amount of revenue and gross profit or loss to be recognized In 2018 and 2019 assuming Nortel recognizes revenue over time according to percentage of completion. 2. Compute the amount of revenue and gross profit or loss to be recognized in 2018 and 2019 assuming this project does not qualify for revenue recognition over time 3. Prepare a partial balance sheet to show how the Information related to this contract would be presented at the end of 2018 assuming Nortel recognizes revenue over time according to percentage of completion. 4. Prepare a partial balance sheet to show how the Information related to this contract would be presented at the end of 2018 assuming this project does not qualify for revenue recognltion over time. Complete this question by entering your answers in the tabs below Required 1Required 2Required 3 Required4 Compute the amount of revenue and gross profit or loss to be recognized in 2018 and 2019 assuming Nortel recognizes revenue over time according to percentage of completion. (Loss amounts should be indicated with a minus sign. Use percentages as calculated and rounded in the table below to arrive at your final answer.) Percentages of completion Choose numerator Choose denominator | : | % complete to date Actual costs to date Estimated total costs 2018 348,0005 1,740,000 20.00% 2019 2018 To date Recognized in prior years Recognized in 2018 Construction revenue Construction expense Gross profit (loss) 520,000 s 348,000 s 172,000 s 520,000 348,000 172,000 2019 To date Recognized in prior years Recognized in 2019 Construction revenue Construction expense Gross profit (loss) 520,000 5 348,000 S 172,000 S (520,000) (348,000) (172,000)

Explanation / Answer

Answer 1. Percentage of Completion Method 2018 2019 Cost Incurred each year (A)        348,000.00    1,995,000.00 Cost Incurred to date (B)        348,000.00    2,343,000.00 Estimated Costs ©    1,392,000.00                         -   Total Estimated Costs (D = B + C)    1,740,000.00    2,343,000.00 % Completed (E = B / D) 20.00% 100.00% Revenue        520,000.00    2,080,000.00 Expenses        348,000.00    1,995,000.00 Gross Profit        172,000.00          85,000.00 Revenue - 2018 = $2,600,000 X 20% = $520,000 Revenue - 2019 = ($2,600,000 X 100%) - $520,000 = $2,080,000 Answer 2. Completed Contract Method Year 1 Year 2 Revenue                         -      2,600,000.00 Expenses                         -      2,343,000.00 Gross Profit                         -          257,000.00 Answer 3. Percentage of Completion Method Balance Sheet (Partial) 2018 2019 Current Assets Accounts Receivable    191,000.00        121,000.00 Cost & Profits > Billings      55,000.00        395,000.00 Current Liabilities Cost & Profits Billings                     -          629,000.00 Current Liabilities Cost & Profits

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