In the Acme Construction progress billing scenario, what amount should be debited to Construction Expenditures?

In the Acme Construction progress billing scenario, what amount should be debited to Construction Expenditures?

• A. 1,200,000
• B. 1,000,000
• C. 1,320,000
• D. 1,080,000

Answer: (A)

When a government records construction through progress billings, the amount billed represents the cost incurred and earned to date. That amount is debited to Construction Expenditures because expenditures in governmental funds reflect the cost of the work as it is performed, with a corresponding liability to the contractor. So, the correct entry for the progress billing is to debit Construction Expenditures for the billed amount and credit a payable to the contractor. If the billing to date is 1,200,000, that is the amount that should be debited to Construction Expenditures. The other figures would reflect cash paid, retainage, or total contract value, which do not match the recognized incurred cost under progress billing.

When a government records construction through progress billings, the amount billed represents the cost incurred and earned to date. That amount is debited to Construction Expenditures because expenditures in governmental funds reflect the cost of the work as it is performed, with a corresponding liability to the contractor. So, the correct entry for the progress billing is to debit Construction Expenditures for the billed amount and credit a payable to the contractor. If the billing to date is 1,200,000, that is the amount that should be debited to Construction Expenditures. The other figures would reflect cash paid, retainage, or total contract value, which do not match the recognized incurred cost under progress billing.