Final answer:
The correct entry for recording construction in progress is to Debit Construction in Progress and Credit Cash, reflecting it as a capital expenditure on the balance sheet with no depreciation recorded until the project is completed.
Step-by-step explanation:
The correct way to record the construction in progress of $135,000 when there is no depreciation being recorded until the project is completed is to Debit Construction in Progress and Credit Cash. The entry should reflect the ongoing investment in the construction and is categorized as a capital expenditure. Therefore, the correct answer is B) Debit Construction in Progress, Credit Cash. You must record this as an asset on the balance sheet until the asset is ready for use, at which point you start depreciating it as per your company's depreciation policy. Every time a payment is made for the construction costs, the cash account is credited (showing a decrease in cash) and the Construction in Progress account is debited( indicating the increase in the value of the construction project).