Question

Imar Construction company signed a contract to build new bridge at a contract price of $5,000,000 and total estimated cost of $4,000,000 the project will be completed within 4 years, the cost incurred to date for each period is, first year $1,000,000- second year $2,500,000- third year $3,200,000 and fourth year $4,100,000 while the estimasted cost to, complete the project for each each period is, first year $3,000,000- second year $1,700,000- third year $1,000,000 and fourth year is $0, based on above question and using percentage of completion method, what is the required journal entry in second year?

a.
Debit Construction in process $2,500,000, cash 2,500,000.

b.
Debit Construction in process $1,0000,000, Cash $1,000,000.

c.
No entry is required.

d.
Debit Construction in process $1,500,000, credit cash, payable $1,500,000.

Answer 1