Problem - Analysis of Percentage-of-Completion Financial Statements
In 2010, 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, 2010, follow.
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Balance Sheet
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Accounts receivable-construction contract billings
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$18,000
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Construction in progress
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$65,000
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Less: Contract billings
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61,500
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Cost of uncompleted contract in excess of billings
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3,500
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Income Statement
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Income (before tax) on the contract recognized in 2010
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$19,500
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What was the initial estimated total income before tax on this contract?