Question
In: Accounting
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 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.
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
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.
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.
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.
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Expert Solution
| 1 | 2018 | 2019 | |||||||||
| Contract price (1) | 2450000 | 2450000 | |||||||||
| Actual cost to date (a) | 336000 | 2206000 | |||||||||
| (336000+1870000) | |||||||||||
| Estimated cost to complete (b) | 1344000 | 0 | |||||||||
| Total estimated cost ©=(a)+(b) | 1680000 | 2206000 | |||||||||
| Percentage of completion (a)/© | 20% | 100% | |||||||||
| Expected gross profit (1)-© | 770000 | 244000 | |||||||||
| Revenue to be recognized=(Contract price*Percentage of completion)-Revenue recognized earlier | |||||||||||
| Gross profit to be recognized=(Expected gross profit*Percentage of completion)-Gross profit already recognized | |||||||||||
| 2018 | |||||||||||
| Revenue to be recognized=(2450000*20%)-0=$ 490000 | |||||||||||
| Gross profit to be recognized=(770000*20%)-0=$ 154000 | |||||||||||
| 2019 | |||||||||||
| Revenue to be recognized=(2450000*100%)-490000=$ 1960000 | |||||||||||
| Gross profit to be recognized=(244000*100%)-154000=$ 90000 | |||||||||||
| 2 | If the project does not qualify for revenue recognition over time,recognize revenue on completion of contract | ||||||||||
| 2018 | |||||||||||
| Revenue to be recognized=0 | |||||||||||
| Gross profit to be recognized=0 | |||||||||||
| (Since contract has not completed) | |||||||||||
| 2019 | |||||||||||
| Revenue to be recognized=Contract price=$ 2450000 | |||||||||||
| Gross profit to be recognized=Contract price-Actual cost to date=2450000-2206000=$ 244000 | |||||||||||
| 3 | Partial balance sheet-2018 | ||||||||||
| Current assets: | |||||||||||
| Accounts receivable | |||||||||||
| Billings made during the year | 446000 | ||||||||||
| Less: Cash collections | 268000 | 178000 | |||||||||
| Cost and profit in excess of billings | |||||||||||
| Cost incurred | 336000 | ||||||||||
| Add:Gross profit recognized | 154000 | ||||||||||
| 490000 | |||||||||||
| Less: Billings | 446000 | 44000 | |||||||||
| 4 | Partial balance sheet-2018 | ||||||||||
| Current assets: | |||||||||||
| Accounts receivable | |||||||||||
| Billings made during the year | 446000 | ||||||||||
| Less: Cash collections | 268000 | 178000 | |||||||||
| Current liability: | |||||||||||
| Billings in excess of cost | |||||||||||
| Billings made during the year | 446000 | ||||||||||
| Less: Cost incurred | 336000 | 110000 | |||||||||
ekkarill92 answered 1 year agoRelated Solutions
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
Internet infrastructure for $2,000,000. 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
$
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$
1,575,000
Estimated costs to complete as of 12/31
1,200,000
0
Billings during the year
380,000
1,620,000
Cash collections during the year
250,000
1,750,000
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
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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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Cash collections during the year
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Required:
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recognized in...
Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,300,000. The project began...
Assume Nortel Networks contracted to provide a customer with
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2019
Costs incurred
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$
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$
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Estimated costs to complete as
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0
Billings during the year
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Cash collections during the
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Required:
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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...
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 2021
and was completed in 2022. Data relating to the contract are
summarized below:
2021
2022
Costs incurred during the year
$
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$
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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
445,000
1,825,000
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 $2,450,000. 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...
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 2016
and was completed in 2017. Data relating to the contract are
summarized below:
2016
2017
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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