Exercise 5-17 Long-term contract; revenue recognition over time and at a point in time [LO5-9]

Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,400,000. 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	$	332,000		$	1,850,000
Estimated costs to complete as of 12/31		1,328,000			0
Billings during the year		441,000			1,700,000
Cash collections during the year		266,000			1,790,000

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.

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
	Choose numerator		Choose denominator	=	% complete to date
2018				=	0
2019				=	0
	2018
	To date	Recognized in prior years		Recognized in 2018
Construction revenue				$0
Construction expense				$0
Gross profit (loss)				$0
	2019
	To date	Recognized in prior years		Recognized in 2019
Construction revenue				$0
Construction expense				$0
Gross profit (loss)				$0

	Revenue	Gross Profit (Loss)
2018
2019

Balance Sheet (Partial)
At December 31, 2018
Current assets:
Current liabilities:

Balance Sheet (Partial)
At December 31, 2018
Current assets:
Current liabilities: