Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,000,000.

| June 8, 2016

Question
Assume .nortel.com/”>Nortel Networks contracted to provide a customer with Internet infrastructure for $2,000,000. The project began in 2011 and was completed in 2012. Data relating to the contract are summarized below:

2011 2012 costs incurred during the year $300,000 $1,575,000 Estimated costs to complete as of 12/31 1,200,000 -0- Billing 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 2011 and 2012 using the percentage-of-completion method.

2. Compute the amount of gross profit or loss to be recognized in 2011 and 2012 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 2011 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 2011 using the completed contract method.

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