Question

Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,000,000. The project began in 2016 and was completed in 2017. Data relating to the contract are summarized below: Compute the amount of revenue and gross profit or loss to be recognized in 2016 and 2017 assuming Nortel recognizes revenue over time according to percentage of completion. (Use percentages as calculated and rounded in the table below to arrive at your final answer. Losses and expenses should be indicated with a minus sign.)

Answer 1

1. compute the amount of revenue and gross profit or loss to be recognized in 2016 and 2017 as follows 2016 2,000,000 2,000,000 2017 Contract price 00,0001,875,000 Actual costs to date(a) Estimate costs to complete Total estimated costs(c-atb Less Gross profit (estimated in 2016) (d) Gross profit(loss) to be recognized (c-d) 100,000 1.200,000 1,500,0001,875,000 125,000 25,000 500,000 Compute the percentage of completion as follows: $300,000 $1,500,000 2016 = = 20% 2011 $1.87 = 1 0090 $1,875,000 $1,875,000 Recognized in Recognized Prior Yearsin 2016 2016 To date Construction Rev Less: Construction Gross Profit(Loss) 000,000*20%) | 400,000.00 00,000.00 100,000.00 400.000.00 300,000.00 100,000.00 Recognized in Recognized Prior Yearsin 2016 2017 Construction Revenue(2,000,000*100%)! 2.000.000 Less: Construction Expense 1,875,000 Gross Profit(Loss) 400,000 1.600,000 300,0001,575,000 100,000 125,000 25,000