Lark Corphas a Contract to Construct a $5,000,000 Cruise Ship at at an Estimated

Lark Corp.has a contract to construct a $5,000,000 cruise ship at an estimated cost of $4,000,000.The company will begin construction of the cruise ship in early January 2011 and expects to complete the project sometime in late 2014.Lark Corp.has never constructed a cruise ship before, and the customer has never operated a cruise ship.Due to this and other circumstances, Lark Corp.believes there are inherent hazards in the contract beyond the normal, recurring business risks.Lark Corp.expects to recover all its costs under the contract.During 2011 and 2012, the company has the following activity:

On its statement of financial position at December 31, 2012, what amount will be reported related to the Construction in Process account?

A) $40,000 costs in excess of billings.
B) $1,020,000 costs in excess of billings.
C) $40,000 billings in excess of costs.
D) $20,000 billings in excess of costs.