C\' ezto.mhed tpx Assume Nortel Networks contracted to provide a customer with I
ID: 2599021 • Letter: C
Question
C' ezto.mhed tpx Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,760,000. The project began in 2016 and was completed in 2017. Data relating to the contract are summarized below 2016 364,000 $2,175,000 2017 Costs incurred during the year Estimated costs to complete as of 12/31 Billings during the year Cash collections during the year 1,456,000 520,000 ,780,000 282,000 1,830,000 Required: 1. Compute the amount of revenue and gross profit or loss to be recognized in 2016 and 2017 assuming Nortel recognizes revenue over time acording 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.) Estimated total gross profit (loss) %complete to date Choose numerator+Choose 2016 2017Explanation / Answer
Given, the project began in 2016 and ended in 2017
Balance sheet items
Current assets-> Accounts receivable = Bills issues - collections = 520000-282000 = 238000
-> Costs and recognized profit in excess of billings = 552000*- 520000** = 32000
* Contract price * Percentage of completion = 2760000 * 20 % in 2016 = 552000
*** Billings in 2016
No current liabilities and this is all about the balance sheet
Particulars 2016 2017 Contract price 2760000 2760000 Cost incurred till date 364000 2175000 Estimated cost to complete 1456000 0 Estimated profit 940000 585000 1.Percentage of completion 20% 100% 1.Total gross profit recognized 188000 585000 (-) Previous years gross profit 0 188000 1.Gross profit recognized in the current year 188000 397000 * Total cost = Cost incurred + Estimated cost 1820000 2175000