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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:
2016:
Cost incurred during the year: $300,000
Estimated costs to complete as of 12/31 1,200,000
Billings during the year 380,000
Cash collections during the year 250,000
2017:
Costs incurred during the year $1,575,000
Estimated costs to complete as of 12/31 -0-
Billings during the year $1,620,000
Cash collections during the year $1,750,000
1. 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.
2. Compute the amount of revenue and gross profit or loss to be recognized in 2016 and 2017 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 2016 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 2016 assuming this project does not qualify for revenue recognition over time.
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