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.
