In 2007, Crane Corporation began construction work under a three-year contract. The contract price is $2,400,000. Crane uses the percentage-of-completion method for financial accounting purposes. The income to be recognized each year is based on the proportion of costs incurred to total estimated costs for completing the contract. The financial statement presentations relating to this contract at December 31, 2007, follow:
Accounts receivable—construction contract billings $100,000
Construction in progress $300,000
Less contract billings 240,000
Costs and recognized profit in excess of billings 60,000
Income (before tax) on the contract recognized in 2007 $60,000
23. How much cash was collected in 2007 on this contract?
24. What was the initial estimated total income before tax on this contract?
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