Question - Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,000,000. The project began in 2013 and was completed in 2014. Data relating to the contract are summarized below:
|
2013
|
2014
|
|
Costs incurred during the year
|
$300,000
|
$1,575,000
|
|
Estimated costs to complete as of 12/31
|
1,200,000
|
0
|
|
Billings during the year
|
380,000
|
1,620,000
|
|
Cash collections during the year
|
250,000
|
1,750,000
|
Required:
1. Compute the amount of gross profit or loss to be recognized in 2013 and 2014 using the percentage-of-completion method.
2. Compute the amount of gross profit or loss to be recognized in 2013 and 2014 using the completed contract method.
3. Prepare a partial balance sheet to show how the information related to this contract would be presented at the end of 2013 using the percentage-of-completion method.
4. Prepare a partial balance sheet to show how the information related to this contract would be presented at the end of 2013 using the completed contract method.