Jones signs a three-year contract to construct a new office building for Smith. The contract price is $3 million and estimated cost $2 million. The contract does not qualify for revenue recognition over time. During year 1, Jones incurs costs of $800,000 and during year 2, costs of $1.2 million. At the end of year 2, Jones estimates that an additional $1.1 million will be necessary to complete the project. At the end of year 2, Jones should recognize:

A. economic resources to be used or turned into cash within one year. b. reports assets, liabilities, and stockholders' equity. c. decrease assets; increase liabilities and stockholders' equity. d. increase assets; decrease liabilities and stockholders' equity. e. an exchange or event that has a direct and measurable financial effect. f. accounts for a business separate from its owners. g. the principle that assets should be recorded at their original cost to the company. h. a standardized format used to accumulate data about each item reported on financial statements. i. the basic accounting equation. j. the two equalities in accounting that aid in providing accuracy. k. the account credited when money is borrowed from a bank using a promissory note. l. cumulative earnings of a company that have not yet been distributed to the owners. m. every transaction has at least two effects. n. amounts presently owed by the business. transaction, separate entity assumption, balance sheet, liabilities, assets, current assets, notes payable, duality of effects, retained earnings, debit.