Question
In: Accounting
Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,050,000. The project began...
Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,050,000. The project began in 2021 and was completed in 2022. Data relating to the contract are summarized below: 2021 2022 Costs incurred during the year $ 304,000 $ 1,595,000 Estimated costs to complete as of 12/31 1,216,000 0 Billings during the year 385,000 1,630,000 Cash collections during the year 260,000 1,755,000 Required: 1. Compute the amount of revenue and gross profit or loss to be recognized in 2021 and 2022 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 2021 and 2022 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 2021 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 2021 assuming this project does not qualify for revenue recognition over time.
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Expert Solution
Answer :-
| 1 | Percentage completion method | 2021 | 2022 |
| Cost incurred in till previous year | 0 | 304,000 | |
| ADD | Cost incurred during the year | 304,000 | 1,595,000 |
| Total cost incurred till date | 304,000 | 1,899,000 | |
| ADD | Estimated cost to be incurred | 1,216,000 | 0 |
| Total estimated cost to be incurred | 1,520,000 | 1,899,000 | |
| Percentage of completion (A) | 20% | 100% | |
| (cost incurred till date /total estimated cost ) | |||
| Total revenue (B) | 2,050,000 | 2,050,000 | |
| Total revenue recognized (A *B) | 410,000 | 2,050,000 | |
| Less | Revenue recognized in previous year | 0 | 410,000 |
| revenue recognized in current year | 410,000 | 1,640,000 | |
| 2021 | 2022 | ||
| Revenue | 410,000 | 1,640,000 | |
| Less | Cost incurred | 304,000 | 1,595,000 |
| Gross profit | 106,000 | 45,000 |
2) Gross profit and loss to be recognized
Revenue Gross profit
2021 0 0
2022 2,050,000 151,000
3)
prepare partial balance sheet: 2021
current asset:
cost and profit in excess of billing : $25,000 (304,000+106,000-385,000)
account receivebles: $125,000
current liabilities: 0
4.)
prepare the partial balance sheet of 2021 that does not qualify the recognized overtime:
current assets:
account receivable: $ 125000
current liabilities:
billing in excess of cost:(385,000- 304,000) = 81,000
ekkarill92 answered 1 year agoRelated Solutions
Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,050,000. The project began...
Assume Nortel Networks contracted to provide a customer with
Internet infrastructure for $2,050,000. The project began in 2018
and was completed in 2019. Data relating to the contract are
summarized below:
20182019
Costs incurred during the year$304,000 $1,595,000
Estimated costs to complete as of 12/31
1,216,000 0
Billings during the year 385,000 1,630,000
Cash collections during the year
252,000 1,755,000
Required:
1. Compute the amount of revenue and gross profit or loss to be
recognized in 2018 and 2019 assuming Nortel recognizes revenue...
Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,000,000. The project began...
Assume Nortel Networks contracted to provide a customer with
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2022
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$
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Estimated costs to complete as of 12/31
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Cash collections during the year
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Assume Nortel Networks contracted to provide a customer with
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2019
Costs incurred
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Estimated costs to complete as
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Billings during the year
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Cash collections during the
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Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,750,000. The project began...
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and was completed in 2022. Data relating to the contract are
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Costs incurred during the year
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Estimated costs to complete as of 12/31
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Billings during the year
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recognized in...
Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,450,000. The project began...
Assume Nortel Networks contracted to provide a customer with
Internet infrastructure for $2,450,000. 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 $
336,000 $ 1,870,000 Estimated costs to complete as of 12/31
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the amount of revenue and gross profit or loss to be recognized in...
Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,450,000. The project began...
Assume Nortel Networks contracted to provide a customer with
Internet infrastructure for $2,450,000. 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
$
336,000
$
1,870,000
Estimated costs
to complete as of 12/31
1,344,000
0
Billings during
the year
446,000
1,710,000
Cash collections
during the year
268,000
1,795,000
Required:
1. Compute the amount of revenue and gross profit
or loss to be recognized in...
Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,100,000. The project began...
Assume Nortel Networks contracted to provide a customer with
Internet infrastructure for $2,100,000. 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
$
308,000
$
1,615,000
Estimated costs to complete as of 12/31
1,232,000
0
Billings during the year
390,000
1,640,000
Cash collections during the year
254,000
1,760,000
Required:
1. Compute the amount of revenue and gross profit
or loss to be recognized in...
Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,100,000. The project began...
Assume Nortel Networks contracted to provide a customer with
Internet infrastructure for $2,100,000. The project began in 2021
and was completed in 2022. Data relating to the contract are
summarized below:
2021
2022
Costs incurred during the year
$
308,000
$
1,615,000
Estimated costs to complete as of 12/31
1,232,000
0
Billings during the year
390,000
1,640,000
Cash collections during the year
270,000
1,760,000
Required:
1. Compute the amount of revenue and gross profit or loss to be
recognized in...
Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,750,000. The project began...
Assume Nortel Networks contracted to provide a customer with
Internet infrastructure for $2,750,000. 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
$
360,000
$
2,155,000
Estimated costs to complete as
of 12/31
1,440,000
0
Billings during the year
500,000
1,770,000
Cash collections during the
year
280,000
1,825,000
Required:
1. Compute the amount of revenue and gross profit
or loss to be recognized in...
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