Noah Construction Company is building a large complex for a contract price of $5,000,000. This is a three-year project and the requirements for recognizing revenue over time are met. The total estimated cost of the project is $4,000,000 and the following information is available:

($ in thousands)	Year 1				Year 2				Year 3
Costs incurred	$	1,000			$	1,500			$	1,250
Estimated completion costs	$	3,000			$	1,500			$	0
Billings	$	750			$	1,750			$	2,500
Cash collected	$	500			$	1,500			$	3,000

Which one of the following entries would be made in Year 1 to record the costs incurred assuming revenue is recognized over time?

Multiple Choice

DR Inventory: Construction in progress $1,000,000 CR Accounts payable, cash, etc. $1,000,000

DR Income on long-term construction contract $1,000,000 CR Accounts payable, cash, etc. $1,000,000

DR Inventory: Construction in progress $1,000,000 CR Billings $1,000,000

DR Inventory: Construction in progress $1,000,000 CR Income on long-term construction contract $1,000,000