On December 31, 2022, Dodd, Inc. appropriately changed the company's method of accounting for long-term construction contracts from the percentage-of-completion method to the cost recovery method for financial statement and income tax purposes. The change will result in a €2,300,000 decrease in the beginning Construction in Process at January 1, 2022. Assume a 30% income tax rate. The cumulative effect of this accounting change on the Deferred Tax Liability account is Group of answer choices 1) a decrease of €690,000. 2) an increase of €690,000. 3) a decrease of €1,610,000. 4)an increase of €2,300,000.
On December 31, 2022, Dodd, Inc. appropriately changed the company's method of accounting for long-term construction contracts from the percentage-of-completion method to the cost recovery method for financial statement and income tax purposes. The change will result in a €2,300,000 decrease in the beginning Construction in Process at January 1, 2022. Assume a 30% income tax rate. The cumulative effect of this accounting change on the Deferred Tax Liability account is Group of answer choices 1) a decrease of €690,000. 2) an increase of €690,000. 3) a decrease of €1,610,000. 4)an increase of €2,300,000.
Chapter14: Taxes On The Financial Statements
Section: Chapter Questions
Problem 20CE
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Transcribed Image Text:On December 31, 2022, Dodd, Inc. appropriately changed the company's method of accounting for long-term
construction contracts from the percentage-of-completion method to the cost recovery method for financial statement
and income tax purposes. The change will result in a €2,300,000 decrease in the beginning Construction in Process at
January 1, 2022. Assume a 30% income tax rate. The cumulative effect of this accounting change on the Deferred Tax
Liability account is Group of answer choices 1) a decrease of €690,000. 2) an increase of €690,000. 3) a decrease of
€1,610,000. 4)an increase of €2,300,000.
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