Question

In late April, the Acme Construction Co. submitted a $1,200,000 progress billing on a construction contract.On May 2, the bill was approved for payment, subject to a ten percent retention, as provided by the contract. Construction expenditures should be debited when ______
A. The bill is paid (except for the ten percent retention).
B. The final ten percent of the bill is paid.
C. The contract is signed.
D. The bill is approved for payment.

Answer 1

Construction expenditures should be debited when D. The bill is approved for payment.

Explanation:

In the above scenario, Acme Construction Co. submitted bill amount of $1,200,000 on a construction contract. The payment of the bill was approved on May 2. According to the contract, 10% was subject to retention.

This construction expenditure is debited when the bill is approved for payment. Contract includes all the details regarding payment and terms and conditions between the companies or parties.

Once the bill submitted by company is approved, then the retention amount will be automatically debited.