Marianne did not turn in her book report. Marianne’s teacher calls her dad to ask why it was not turned in. Her dad says:
That’s strange, I know she was working on it on Monday.
Here, we understand that Marianne’s dad is talking about what was happening at some particular moment: probably, when he checked on Marianne. A full version of the sentence might be:
That’s strange, I know she was working on it when I talked to her on Monday.
By using the past continuous, Marianne’s dad is implying that he witnessed the work while it was in progress.
He could use the past simple instead:
That’s strange, I know she worked on it on Monday.
But this implies that he didn’t actually witness Marianne working. He has some other way of knowing that the work happened.