Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,350,000. 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 $ 328,000 $ 1,701,000

Estimated costs to complete as of 12/31 1,312,000 0

Billings during the year 436,000 1,914,000

Cash collections during the year 292,000 2,058,000

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.