Exercise 5-17 Long-term contract, revenue recognition over time and at a point i
ID: 2450325 • Letter: E
Question
Exercise 5-17 Long-term contract, revenue recognition over time and at a point in time [LO5-9] 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 Costs incurred during the year Estimated costs to complete as of 12/31 Billings during the year Cash collections during the year $ 300,000 $1,575,000 1,200,000 380,000 250,000 1,620,000 1,750,000 Required 1. 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.) 2016 2017 Estimated total gross profit (loss)Explanation / Answer
1.
2.
3. Partial balanc sheet when % completion is applied:
Assets :
4. When % completion method is not follwed:
0
Net income 125,000
Estimate Actual Revenue (380,000+1,620,000) (a) 2,000,000 2,000,000 Costs incurred in 2016 300,000 300,000 Costs for 2017 1,200,000 1,575,000 Total cost (b) 1,500,000 1,875,000 Gross profit on the project (a-b) 500,000 125,000 Estimated Gross profit 2016 2017 Costs incurred in 2016 300000 1,200,000 % completion 20% 80% Gross profit 100,000 400,000 Percentage of completion Numerator Denominator % 2016 300,000 1,500,000 20% 2017 1,875,000 1,875,000 100%Related Questions
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