(Change in Principle—Long-Term Contracts) Cullen Construction Company, which began operations in 2017, changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2018. For tax purposes, the company employs the completed-contract method and will continue this approach in the future. The appropriate information related to this change is as follows. Pretax Income Percentage-of-Completion Completed-Contract Difference 2017 $880,000 $590,000 $290,000 2018 900,000 480,000 420,000 Instructions(a) Assuming that the tax rate is 40%, what is the amount of net income that would be reported in 2018?(b) What entry(ies) are necessary to adjust the accounting records for the change in accounting principle?
(Change in Principle—Long-Term Contracts) Cullen Construction Company, which began operations in 2017, changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2018. For tax purposes, the company employs the completed-contract method and will continue this approach in the future. The appropriate information related to this change is as follows. Pretax Income Percentage-of-Completion Completed-Contract Difference 2017 $880,000 $590,000 $290,000 2018 900,000 480,000 420,000 Instructions(a) Assuming that the tax rate is 40%, what is the amount of net income that would be reported in 2018?(b) What entry(ies) are necessary to adjust the accounting records for the change in accounting principle?
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter17: Advanced Issues In Revenue Recognition
Section: Chapter Questions
Problem 25E: Koolman Construction Company began work on a contract in 2019. The contract price is 3,000,000, and...
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(Change in Principle—Long-Term Contracts) Cullen Construction Company, which began operations in 2017, changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2018. For tax purposes, the company employs the completed-contract method and will continue this approach in the future. The appropriate information related to this change is as follows.
| Pretax Income | |||
| Percentage-of-Completion | Completed-Contract | Difference | |
| 2017 | $880,000 | $590,000 | $290,000 |
| 2018 | 900,000 | 480,000 | 420,000 |
Instructions
(a) Assuming that the tax rate is 40%, what is the amount of net income that would be reported in 2018?
(b) What entry(ies) are necessary to adjust the accounting records for the change in accounting principle?
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