Intermediate Accounting Plus Mylab Accounting With Pearson Etext -- Access Card Package (2nd Edition)
Intermediate Accounting Plus Mylab Accounting With Pearson Etext -- Access Card Package (2nd Edition)
2nd Edition
ISBN: 9780134833101
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 21, Problem 21.2E

Change in Accounting Principle, Long-Term Construction Contracts. Arlen Technology Solutions, Inc. adopted the percentage-of-completion method when it began operations on January 1, 2016. The company elected to change to the completed-contract method on January 1, 2018, due to a change in the size of its computer network contracts. Net income under both methods for the first 3 years of the company’s operations is presented in the following table. Ignore income tax effects.

Net Income
Year Ended Percentage of Completion Completed Contract
December 31, 2016 $168,000 $147,000
December 31, 2017 112,000 98,000
December 31, 2018 231,000 210,000

Required (Round to the nearest whole dollar)

  1. a. Prepare the journal entry required to record the accounting change on January 1, 2018.
  2. b. Prepare the footnote to disclose the change from the percentage-of-completion to the completed- contract method Designate the note as “Note A Change in Method of Accounting for Computer Network Contracts.”
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Carrboro Construction Company elected to change its method of accounting from the percentage-of-completion method to the completed-contract method. Prior-years income (cumulative) would have been $310,000 lower if Carrboro had always used the completed contract method. The company is subject to a 35% tax rate. Prepare the journal entry to record the change in method. (Record debits first, then credits. Exclude explanations from any journal entries.) Account Current Year
Skysong IT Consulting changed from the recognition overtime (percentage-of-completion) to the completed-contract method for financial reporting purposes. The company will continue to use the completed-contract method for tax purposes. For years prior to 2017, pretax income under the two methods was as follows: percentage-of-completion $214,000, and completed-contract $156,000. The tax rate is 30%. Prepare Skysong IT’s 2017 journal entry to record the change in accounting principle.
On January 1, 2024, Hampton's Construction, Inc. decided to change from the completed-contract method of accounting to the percentage-of-completion method. Hampton will continue to use the completed-contract method for income tax purposes. The following information is available for net income. The income tax rate for all years is 35%.Net Income Year Ended Percentage of Completion Completed Contract December 31, 2022 $145,000 $125,000 December 31, 2023 179,000 159,000 December 31, 2024 267,000 181,000 ​ ​ ​ What is the journal entry to record the change in accounting principle on January 1, 2024? Group of answer choices Retained Earnings 55,900 Deferred Tax Asset 30,100   Construction in Progress86,000 Construction in Progress 40,000 ​ Retained Earnings ​ 40,000 No entry needed. Construction in Progress 40,000 Deferred Tax Liability 14,000   Retained Earnings26,000

Chapter 21 Solutions

Intermediate Accounting Plus Mylab Accounting With Pearson Etext -- Access Card Package (2nd Edition)

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