In late April, the Acme Construction Company 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. The amount that should be debited to Construction Expenditures is:

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Multiple Choice

In late April, the Acme Construction Company 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. The amount that should be debited to Construction Expenditures is:

In government accounting for construction projects, expenditures reflect the total cost of the project incurred, not just cash paid. When a progress bill is approved with retention, the full contract amount is recorded as an expenditure, and the holdback is tracked as a separate liability.

Here, the bill is 1,200,000 and the retention is 10% of that, or 120,000. The cash actually disbursed to the contractor is 1,200,000 minus 120,000, which is 1,080,000. The construction expenditures, however, include the entire contract amount plus the retainage, totaling 1,320,000. The corresponding entries would debit Construction Expenditures 1,320,000, credit Cash 1,080,000, and credit Retainage Payable 120,000. The retainage liability remains until it’s released at project completion.

In late April, the Acme Construction Company 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. The amount that should be debited to Construction Expenditures is:

Enhance your knowledge of GASB and FASAB Standards. Study with multiple choice questions, hints, and detailed explanations. Prepare efficiently for your exam!

In late April, the Acme Construction Company 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. The amount that should be debited to Construction Expenditures is:

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