Southtel Is a Builder of Large Digital Networks Required:
Calculate the Amount of Revenue, Cost of Goods Sold

question 84

Essay

Southtel is a builder of large digital networks. In the midst of the high-tech euphoria, the company bid and won a $48,000,000 contract to build a network for the country of Elbonia. Details on the project over the last three years are as follows:
$$\begin{array} { | l | l | l | l | } \hline & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } \\\hline \text { Cumulative costs incurred } & 16,500 & 36,000 & 54,000 \\\hline \text { Additional costs to complete as estimated at } & & & \\\text { year end } & 49,500 & 12,000 & 0 \\\hline \text { Amounts invoiced to customer in the year } & 13,500 & 26,000 & 21,000 \\\hline \text { Cash collected in the year from the customer } & 10,500 & 25,000 & 12,500 \\\hline\end{array}$$ Required:
Calculate the amount of revenue, cost of goods sold (COGS), and gross profit (or loss)to be recognized in each of the three years. The company uses the percentage of completion method to account for long-term contracts. Record your answer in the following table.
$$\begin{array} { | l | r | r | r | r | } \hline & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Total } \\\hline \text { Revenue } & & & & 48,000 \\\hline \text { Less: Cost of goods sold } & 16,500 & & & 54,000 \\\hline \text { Less: Expected loss (recovery) } & & ( 13,500 ) & & 0 \\\hline \text { Gross profit (loss) } & & & & ( 6,000 ) \\\hline\end{array}$$

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Definitions:

Bacteriologic Culture

The laboratory process of growing bacteria from a sample to identify a possible infection.

Surgical Excision

The process of removing tissue or part of an organ using surgical techniques.

Triangular Area

A geometric region defined by three points that form the shape of a triangle, often used in mathematical calculations and geometry.

Purplish-Brown

Descriptive of a color that is a mix between purple and brown, often used to describe bruises or certain skin conditions.