Question

Anare 200 points Exercise 5-17 Long term contract, revenue recognition over time and at a point in time ILOS-9 Assume Norte Networks contracted to provide a custom w was completed in 2010 Data relating to the contractare intet and below structure for 2400 000. The 2018 and 2018 2015 $1.350.000 Costs incurred during the year Estimated costs to complete as of 12/31 Bangs during the year Cash collections during the year 5332 000 1,328,000 441.000 200 000 1.700.000 1.700.000 Required: 1. Compute the amount of revenue and gross profit or loss to be recognised in 2013 and 2019 a ming Norconcerns 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 quality 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 suming this project does not quality for revenue recognition over time. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 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. (Loss amounts should be indicated with a minus sign.) 2018 2019S Revenue $ 480,000 70,000 Gross Profit (Loss) $ $ 218,000 Required 1 Required 3 ) References

Answer 1

Ques 1 2018 740,000 2019 218,000 Estimated total gross profit 2019 2,400,000 2,182,000 Contract price Actual costs to date Estimated costs to complete Total estimated costs Gross profit (estimated in 2016) 2018 2,400,000 332,000 1,328,000 1,660,000 740,000 2,182,000 218,000 Revenue recognition 2018 332000/1660000*2400000 480000 1,920,000 2019 2400000-480000 Gross profit recognition 2018 480000-332000 148,000 70,000 2019 1920000-1850000 2016 2017 Actual costs estimated costs % completion 332,000 1,660,000 20% 2,182,000 2,182,000 100% 2016 to date Construction revenue Construction expense Gross profit(loss) recognised prior recognised 480000 480000 -332,000 -332000 148,000 148000 2017 to date Construction revenue Construction expense Gross profit(loss) recognised prior recognised 2,400,000 480000 1920000 -2,182,000 -332000 -1850000 218000 148000 70000 revenue gross profit Ques 2 2016 2017 2,400,000 218000

Journal -percentage completion method 2018 332000 332000 2019 1850000 Construction in progress cash 1850000 441000 1700000 accounts receivbale billings on construction contract 441000 1700000 cash 2660001 1790000 accounts receviable 266000 1790000 construction in progress construction expenses revenue from long term contract 148000 332000 70,000 1850000 480000 1,920,000 2400000 billings on contruction contract | constrcution in progress | | 2400000 Journal -completed contract method 2018 332000 2019 1850000 Construction in progress cash 332000 1850000 441000 1700000 accounts receivbale billings on construction contract 441000 1700000 cash 266000 1790000 accounts receviable 266000 1790000 construction in progress construction expenses revenue from long term contract 218,000|| 2,182,000 2,400,000 2,400,000 billings on contruction contract constrcution in progress 2400000

Ques 3 Balance sheet(partial) At decemner 31 2016 current assets accounts receivable costs and profits in excess of billings 175000| 480,000/332000+148000 current liabiltities Ques 4 Balance sheet(partial) At decemner 31 2016 current assets accounts receivable 175000 current liabiltities Billings in excess of costs 1090001 441000-332000