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:
Required:
1. Compute the amount of gross profit or loss to be recognized in 2013 and 2014 using the percentage-
ofcompletion 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.
Answer:
Requirement 1
2013 2014
Contract price $2,000,000 $2,000,000
Actual costs to date 300,000 1,875,000
Estimated costs to complete 1,200,000 -0-
Total estimated costs 1,500,000 1,875,000
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:
Required:
1. Compute the amount of gross profit or loss to be recognized in 2013 and 2014 using the percentage-
ofcompletion 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.
Answer:
Requirement 1
2013 2014
Contract price $2,000,000 $2,000,000
Actual costs to date 300,000 1,875,000
Estimated costs to complete 1,200,000 -0-
Total estimated costs 1,500,000 1,875,000
