How much cash was collected on the contract

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Reference no: EM132957196

In 2021, Pharoah Corporation began construction work under a three-year contract. The contract price is $800000. Pharoah 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, 2021, follow:


Balance Sheet

Accounts receivable-construction contract billings $336000

Construction in progress$1000000

Less contract billings800000

Costs and recognized profit in excess of billings 200000

Income Statement

Income (before tax) on the contract recognized in 2021 $200000

Problem 1: How much cash was collected in 2021 on this contract?

Option 1: $464000
Option 2: $64000
Option 3: $336000
Option 4: $800000

Reference no: EM132957196

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