Question

Help Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,760,000. The project began in 2018 and was completed in 2019. Data relating to the contract are summarized below: Costs incurred during the year Estimated costs to complete as of 12/31 Billings during the year Cash collections during the year 2018 364,000 $2,175,000 1,456,000 520,000 282,000 2019 0 1,780,000 1,830,000 Required: 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 recognition over time. Complete this question by entering your answers in the tabs below. Required 4 Required 1 Required 2 Required 3 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 % complete to date Choose denominator Estimated costs to complete Choose numerator + Actual costs to date 0 + 2018 0 + 2019 2018

Answer 1

Percentage of Completion Choose Numerator / Choose Denominator Actula Cost to Date / Estimated Total Costs 2018 3640001 1820000 2019 2539000 2539000 % Completion % Completion 20% 100% To Date 2018 Recognised in Prior Year 0 Recognised in 2021 Construction revenue Construction Expenses Gross Profit 552000 -364000 188000 0 0 552000 -364000 188000 Construction revenue Construction Expenses Gross Profit To Date 2760000 -2539000 221000 2019 Recognised in Prior Year 552000 -364000 188000 Recognised in 2022 2208000 -2175000 33000

Gross Profit and Loss To be Recognised Revenue Gross Profit 2018 2019 2760000 221000 Partial Balance Sheet At December 31, 2018 Current Assets : Accounts Receivables Costs and Profit in Excess of Billling 238000 32000 Current Liabilites Partial Balance Sheet At December 31,2018 Current Assets : accounts Receivables 238000 Current Liabilites Billing inexcess of Costs 156000

Working Notes 2019 2760000 2539000 Contract Cost incurred During the Period Estimated Costs to Complete as of 12/31 Estiamted Costs Gross Profit 2018 2760000 364000 1456000 1820000 940000 2539000 221000 Revenue Recognised 2018: (364000/1820000)*2760000 2019: 2760000-552000 552000 2208000 2018:Gorss Profit = 552000-364000 2019: Gross Profit = 2208000-2175000 188000 33000