Question
Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,450,000. The project began in 2021 and was completed in 2022. Data relating
Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,450,000. 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 | $ | 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 | 361,000 | 1,795,000 | ||||
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.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started