In 2020, Steinrotter Construction Corp. began construction work under a 3-year contract. The contract price was $1,000,000. Steinrotter uses the percentage-of-completion method for financial accounting purposes. The income to be recognized each year is based on the proportion of cost incurred to total estimated costs for completing the contract. The financial statement presentations relating to this contract at December 31, 2020, are shown below.

Instructions

a. How much cash was collected in 2020 on this contract?

b. What was the initial estimated total income before tax on this contract?

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Balance Sheet Accounts receivable Construction in process Less: Billings Costs and recognized profit in excess of billings Income Statement Income (before tax) on the contract recognized in 2020 $18,000 $65,000 61,500 3,500 $19,500