Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 5, Problem 5.17E
Long-term contract; revenue recognition over time and at a point in time
• LO5–9
Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,000,000. The project began in 2018 and was completed in 2019. Data relating to the contract are summarized below:
| 2018 | 2019 | |
| 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 revenue and gross profit or loss to be recognized in 2018 and 2019 assuming Nortel recognizes revenue over time according to percentage of completion.
2. Compute the amount of revenue and gross profit or loss to be recognized in 2018 and 2019 assuming this project does not qualify for revenue recognition over time.
3. Prepare a partial
4. Prepare a partial balance sheet to show how the information related to this contract would be presented at the end of 2018 assuming this project does not qualify for revenue recognition over time.
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Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,000,000. The project began in 2018 and was completed in 2019. Data relating to the contract are summarized below:2018 2019Costs incurred during the year $ 300,000 $ 1,575,000Estimated costs to complete as of 12/31 1,200,000 –0–Billings during the year 380,000 1,620,000Cash collections during the year 250,000 1,750,000Required:1. Compute the amount of revenue and gross profit or loss to be recognized in 2018 and 2019 assuming Nortelrecognizes revenue over time according to percentage of completion
Assume Nortel Networks contracted to provide a customer with Internet infrastructure for $2,700,000. The project began in 2021 and was completed in 2022. Data relating to the contract are summarized below:
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Costs incurred during the year
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Estimated costs to complete as of 12/31
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0
Billings during the year
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Cash collections during the year
415,000
1,820,000
Required:1. Compute the amount of revenue and gross profit or loss to be recognized in 2021 and 2022 assuming Nortel recognizes revenue over time according to percentage of completion.2. Compute the amount of revenue and gross profit or loss to be recognized in 2021 and 2022 assuming this project does not qualify for revenue recognition over time.3. Prepare a partial balance sheet to show how the information related to this contract would be presented at the end of 2021 assuming Nortel recognizes revenue over time according to…
Assume Avaya contracted to provide a customer with Internet infrastructure for $2,200,000. The project began in 2024 and was completed in 2025. Data relating to the contract are summarized below:
2024
2025
Costs incurred during the year
$ 316,000
$ 1,700,000
Estimated costs to complete as of 12/31
1,264,000
0
Billings during the year
400,000
1,660,000
Cash collections during the year
290,000
1,770,000
Prepare a partial balance sheet to show how the information related to this contract would be presented at the end of 2024, assuming Avaya recognizes revenue over time according to percentage of completion.
Prepare a partial balance sheet to show how the information related to this contract would be presented at the end of 2024, assuming this project does not qualify for revenue recognition over time.
Chapter 5 Solutions
Intermediate Accounting
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revenue recognition; loss on...Ch. 5 - Installment sales method On July 1, 2018, Apache...Ch. 5 - Prob. 5.36BECh. 5 - Cost recovery method Refer to the situation...Ch. 5 - Prob. 5.38BECh. 5 - Prob. 5.39BECh. 5 - Revenue recognition; software contracts under IFRS...Ch. 5 - Prob. 5.41BECh. 5 - Prob. 5.1ECh. 5 - Prob. 5.2ECh. 5 - Allocating transaction price LO54 Video Planet...Ch. 5 - Prob. 5.4ECh. 5 - Prob. 5.5ECh. 5 - Prob. 5.6ECh. 5 - Prob. 5.7ECh. 5 - Prob. 5.8ECh. 5 - Prob. 5.9ECh. 5 - Variable considerationmost likely amount; change...Ch. 5 - Variable considerationexpected value; change in...Ch. 5 - Prob. 5.12ECh. 5 - Approaches for estimating stand-alone selling...Ch. 5 - FASB codification research LO56, LO57 Access the...Ch. 5 - Franchises; residual method LO56, LO57 Monitor...Ch. 5 - FASB codification research LO58 Access the FASB...Ch. 5 - Long-term contract; revenue recognition over time...Ch. 5 - Long-term contract; revenue recognition over time...Ch. 5 - Long-term contract; 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