Sheridan Inc., a real estate developing company, was accounting for its long-term contracts using the completed contract method prior to 2021. In 2021, it changed to the percentage-of-completion method. The company decided to use the same for income tax purposes. The tax rate enacted is 40%. Income before taxes under both the methods for the past three years appears below. Completed contract Percentage-of-completion 2019 2020 2021 $415000 $279000 $143000 715000 347000 235000 Which of the following will be included in the journal entry made by Sheridan to record the income effect? a) A debit to Retained Earnings for $229,200. b) A credit to Retained Earnings for $208,200. c) A credit to Retained Earnings for $140,200. d) A debit to Retained Earnings for $140,200.
Sheridan Inc., a real estate developing company, was accounting for its long-term contracts using the completed contract method prior to 2021. In 2021, it changed to the percentage-of-completion method. The company decided to use the same for income tax purposes. The tax rate enacted is 40%. Income before taxes under both the methods for the past three years appears below. Completed contract Percentage-of-completion 2019 2020 2021 $415000 $279000 $143000 715000 347000 235000 Which of the following will be included in the journal entry made by Sheridan to record the income effect? a) A debit to Retained Earnings for $229,200. b) A credit to Retained Earnings for $208,200. c) A credit to Retained Earnings for $140,200. d) A debit to Retained Earnings for $140,200.
Chapter18: Accounting Periods And Methods
Section: Chapter Questions
Problem 47P: How do the all events and economic performance requirements apply to the following transactions by...
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Transcribed Image Text:Sheridan Inc., a real estate developing company, was accounting for its long-term
contracts using the completed contract method prior to 2021. In 2021, it changed to
the percentage-of-completion method.
The company decided to use the same for income tax purposes. The tax rate enacted
is 40%. Income before taxes under both the methods for the past three years
appears below.
Completed contract
Percentage-of-completion
2019
2020
2021
$415000
$279000 $143000
715000 347000 235000
Which of the following will be included in the journal entry made by Sheridan to
record the income effect?
a) A debit to Retained Earnings for $229,200.
b) A credit to Retained Earnings for $208,200.
c) A credit to Retained Earnings for $140,200.
d) A debit to Retained Earnings for $140,200.
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