Question

Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,000,000. The project began in 2018 and was completed in 2019. Data relating to the contract are summarized below: 2018 2019 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 1,620,000 250,000 1,750,000 Required 1. Compute the amount of revenue and gross profit or loss to be recognized in 2018 and 2019 assuming Nortel recognizes revenue g 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 recognition over time. Complete this question by entering your answers in the tabs below Required1Required 2 Required 3Required 4 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 Use percentages as calculated and rounded in the table below to arrive at your final answer. Loss amounts should be indicated with a minus sign.)

Answer 1

1)	Percentages of completion
		Numerator/	Denominator =	% complete to date
		Cost incurred to date/	Total estimated cost =
	2018	300000	1500000	20%
	2019	1875000	1875000	100%
	2018
		To date	Recognized in pys	Recognized in 2018
	Construction revenue	400000	0	400000
	Construction expense	300000	0	300000
	Gross profit (loss)	100000	0	100000
	2018
		To date	Recognized in pys	Recognized in 2018
	Construction revenue	2000000	400000	1600000
	Construction expense	1875000	300000	1575000
	Gross profit (loss)	125000	100000	25000
2)		Revenue	Gross profit (Loss)
	2018	0	0
	2019	2000000	125000
3)	BALANCE SHEET PARTIAL-DECEMBER 31, 2018:
	Current assets:
	Costs and profit in excess of billings		20000
	Accounts receivable		130000
4)	BALANCE SHEET PARTIAL-DECEMBER 31, 2018:
	Current assets:
	Accounts receivable		130000
	Current liabilities:
	Billings in excess of costs		80000