E18-13B (Analysis of Percentage-of-Completion Financial Statements)In 2014, Landers Construction Corp. began construction work under a 5-year contract. The contract price was $25,000,000. Landers uses the percentage-of-completion method for financial acco

E18-13B (Analysis of Percentage-of-Completion Financial Statements)In 2014, Landers Construction Corp. began construction work under a 5-year contract. The contract price was $25,000,000. Landers 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, 2014, follow.

Balance Sheet

Accounts receivable—construction contract billings   $150,500

Construction in progress $650,000

Less: Contract billings 260,000

Cost of uncompleted contract in excess of billings 390,000

Income Statement

Income (before tax) on the contract recognized in 2014 $130,000

Instructions

(a) How much cash was collected in 2014 on this contract?

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

                                                                                                                          (AICPA adapted)