(Analysis of Percentage-of-Completion Financial Statements)

In 2007, Beth Botsford Construction Corp. began construction work under a 3-year contract. The contract price was $1,000,000. Beth Botsford uses the percentage-of-completion method for inancial accounting purposes. The income to be recognized each year is based on the proportion of ost incurred to total estimated costs for completing the contract. The financial statement presentations relating to this contract at December 31, 2007, follow.

Balance Sheet

Accounts receivable-construction contract billings


Construction in progress


Less: contract billings


Cost of uncompleted contract in excess of billings


Income statement

Income (before tax) on the contract recognized in 2007



(a) How much cash was collected in 2007 on this contract?

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