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Noah Construction Company is building a large complex for a contract price of $5,000,000. This is a three-year project and the requirements for recognizing revenue

Noah Construction Company is building a large complex for a contract price of $5,000,000. This is a three-year project and the requirements for recognizing revenue over time are met. The total estimated cost of the project is $4,000,000 and the following information is available:

($ in thousands)Year 1Year 2Year 3
Costs incurred$1,000$1,500$1,250
Estimated completion costs$3,000$1,500$0
Billings$750$1,750$2,500
Cash collected$500$1,500$3,000

Using revenue recognition standards prior to ASC Topic 606, which one of the following entries would be made in Year 3 to record the completion and acceptance of the project using the completed-contract method of revenue recognition?

Multiple Choice

DR Inventory: Construction in progress $3,750,000 DR Income on long-term construction contract $1,250,000 CR Billings on construction in progress $5,000,000

DR Billings on construction in progress $1,250,000 CR Inventory: Construction in progress $1,250,000

DR Billings on construction in progress $5,000,000 CR Inventory: Construction in progress $3,750,000 CR Income on long-term construction contract $1,250,000

DR Inventory: Construction in progress $5,000,000 CR Billings on construction in progress $5,000,000


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