IT Technology Enters into a Contract with the Federal Government

question 62

Multiple Choice

IT Technology enters into a contract with the federal government to create a system for the price of $8 million. IT receives $3 million when the contract is signed and the other $5 million upon completion of the project. The government maintains control of the system during the creation process. IT estimates that 15,000 labor hours will be required to complete the product. During the current year 7,000 labor hours are used and during the following year, the remaining 8,000 hours were used. What is the journal entry at inception of the project?

• A) Debit to Cash; Credit to Sales Revenue
• B) Debit to Cash; Credit to Unearned Revenue
• C) Debit to Cash; Government Contracts
• D) Debit to Cash; Credit to Accounts Receivable

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Definitions:

Disposable Income

The money households have for spending and saving after subtracting income taxes.

Disposable Income

The amount of income left for spending or saving after taxes have been paid.

C + I

Represents the sum of consumer spending (C) and investment spending (I) in an economy's GDP formula.

Capacity Utilization Rate

A metric used to measure the degree to which a firm or economy is operating at its full potential or maximum efficiency.