Hello I am with connect homework for chapter 5 of Sceland 8th edition. This is t

ID: 2422389 • Letter: H

Question

Hello I am with connect homework for chapter 5 of Sceland 8th edition. This is the problem. Do you have it?

====

Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,000,000. The project began in 2016 and was completed in 2017. Data relating to the contract are summarized below:

2016

2017

Costs incurred during the year

300,000

1,575,000

Estimated costs to complete as of 12/31

1,200,000

Billings during the year

380,000

1,620,000

Cash collections during the year

250,000

1,750,000

Required:

Compute the amount of revenue and gross profit or loss to be recognized in 2016 and 2017 assuming Nortel recognizes revenue over time according to percentage of completion. (Use percentages as calculated and rounded in the table below to arrive at your final answer. Losses and expenses should be indicated with a minus sign.)

Explanation / Answer

Calculation of amount of revenue and gross profit or loss to be recognized:

Year 2016

Year 2017

Contract Amount (A)

$ 2,000,000

Estimated costs to complete as of 12/31 (B)

$ 1,200,000

$ -

Costs incurred during the year (C)

$ 300,000

$ 1,575,000

Total Estimated Cost (D) = B+C

$ 1,500,000

$ 1,875,000

(1575000+300000)

Percentage of completion= (E) = C / D

20%

100%

(Completed)

Total Estimated Gross Profit (F) = A-D

$ 500,000

$ 125,000

Gross Profit/ (loss) for the year = F*E

$ 100,000

$ 25,000

(125000-100000)