Assume Nortel Networks contracted to provide a customer with Internet infrastruc

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.)

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 Recognized in prior years Recognized in 2016 To date 400,000 400,000 Construction expense Gross profit (loss) 2017 Recognized in prior years Recognized in 2017 To date 2,000,000 2,000,000 Construction expense Gross profit (loss) 125,000 125,000 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 Revenue 2016 2017 125,000

Explanation / Answer

Answer to Question 1

workings for percentage of completion:

2) Answer to Question 2:

Revenue and profit to be recognized only in 2017: 2,000,000 & 125,000

to date recognized recognized in previous in 2016 years construction revenue 400000 0 400000 construction expense 300000 0 300000 gross profit (loss) 100000 0 100000 to date recognized recognized in previous in 2017 years construction revenue 2000000 400000 1600000 construction expense 1875000 300000 1575000 gross profit (loss) 125000 100000 25000

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