Question

Kline Corp. recognizes revenue over time to account for long-term contracts. The contract price is $5 million, total construction costs are $3.75 million, actual costs incurred during the first year are $1.5 million, and the revenue recognized is $2 million. The journal entry to record revenue during year 1 is: (Select all that apply.) Credit: Revenue $2 million.

Answer 1

Answer:

The journal entry which is to be recorded is shown below:

Explanation:

Contract Price A/c...................................Dr    $500,000

Cost of constructionA/c.........................Dr   $150,000

                 Revenue A/c................................Cr   $2,000,000

As the company recording the revenue, so the revenue account is credited. It involves the cost of construction which is debited and the contract price account is debited.

Note: The options are missing. So, proving the journal entry in the answer.