Financial Instruments: HAVERFORD CO. example.

Hi Chris,

I watch a lot of your videos and thank you for the concise explanation, at all times.

I was going through a past question: HAVERFORD CO
(Below is the trial balance for Haverford Co at 31 December 20X7)…and I understood most of the bits. But among the additional notes, the one that i quite couldn’t understand was why the $1.4m received from the contract was not deducted from the total $2m profit. It was stated that it had been included in the trial balance and i was expecting it to be just the balance of $0.6m to be added to the profit adjustment. Please see below for reference:

(ii) During the year, Haverford Co entered into a contract to construct an asset for a
customer, satisfying the performance obligation over time. The contract had a total
price of $14m. The costs to date of $1.9m are included in the above trial balance. Costs
to complete the contract are estimated at $7.1m.
At 31 December 20X7, the contract is estimated to be 40% complete. To date,
Haverford Co has received $1.4m from the customer and this is shown in the above
trial balance.

Please help clarify this. Thank you.