On October 1, your calendar year company, which is on the accrual basis, signs a $20,000 painting contract and makes a $4,000 advance, which you record in Painting Expense. If, on December 31, management informs that your 25% of the work has been completed, what adjusting entry will you record?

1. Debit Painting Expense for $1,000
2. Debit Painting Expense for $9,000
3. Debit Painting Expense for $5,000
4. Credit Accounts Payable for $5,000