Blue 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 from |
||||||
Percentage-of-Completion |
Completed-Contract |
Difference |
||||
2017 | $966,000 | $600,000 | $366,000 | |||
2018 | 906,000 | 434,000 | 472,000 |
(a) Assuming that the tax rate is 35%, what is the
amount of net income that would be reported in 2018?
Net income | $
|
(b) What entry is necessary to adjust the
accounting records for the change in accounting principle?
(Credit account titles are automatically indented when
amount is entered. Do not indent manually. If no entry is required,
select "No Entry" for the account titles and enter 0 for the
amounts.)
Account Titles and Explanation |
Debit |
Credit |
|
|
|
|
|
|
|
|
|
a | |||
Net income | 588900 | =906000*(1-35%) | |
b | |||
Debit | Credit | ||
Construction in Process | 366000 | ||
Deferred Tax | 128100 | =366000*35% | |
Retained Earnings | 237900 |
Blue Construction Company, which began operations in 2017, changed from the completed-contract to...
Tamarisk Construction Company 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. (Hint: Adjust all tax consequences through the Deferred Tax Liability account.) The appropriate information related to this change is as follows. Pretax Income from: Percentage-of-Completion Completed-Contract Difference 2017 $714,000 $647,000 $67,000 2018 642,000 512,000 130,000 (a) Assuming that the tax rate is 30%, what...
At the beginning of 2017, Culver Construction Company changed
from the completed-contract method to recognizing revenue over time
(percentage-of-completion) 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 $110,500, and
completed-contract $72,300. The tax rate is 30%.
Prepare Culver’s 2017 journal entry to record the change in
accounting principle. (Credit account titles are
automatically indented when amount is...
At the beginning of 2017, Stellar Construction Company changed
from the completed-contract method to recognizing revenue over time
(percentage-of-completion) 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 $114,200, and
completed-contract $79,400. The tax rate is 40%.
Prepare Stellar’s 2017 journal entry to record the change in
accounting principle. (Credit account titles are
automatically indented when amount is...
inment NEX MY INSTRUCTOR FULL SCREEN PRINTER VERSION Exercise 22-1 Whispering Construction Company 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. (Hint: Adjust all tax consequences through the Deferred Tax Liability account.) The appropriate information related to this change is as follows. Pretax Income from: Percentage-of- Completed Completion Contract $761,000 $610,000 688,000 462,000 2017...
At the beginning of 2018, a construction company that began operations in 2016 changed from the completed-contract method to the percentage-of-completion method for accounting purposes but not for tax purposes. Gross profit figures under both methods for the past three years appear below: Completed-Contract Percentage-of-Completion 2016 $ 950,000 $ 1,800,000 2017 1,250,000 1,900,000 2018 1,400,000 2,100,000 Assuming an income tax rate of 30% for all years, the effect of this accounting change on prior periods should be reported by f...
Exercise 22-1 Monty Construction any changed from the comed-contract to the percent method and will continue this proach in the future. Ad alta com of completion method of e s through the Deferred to using for long-term construction s account. The programmation 2018 For de change the c ente r s Pretax income from Percentage of Completed Completion Contract 5727.000 $561.000 640.000 490,000 Difference 1.000 190.000 (a) Assuming that the tax is 04. What is the amount of income that...
At the beginning of 2015, a construction company changed from the completed-contract method to the percentage-of-completion method for accounting purposes but not for tax purposes. Income before taxes under both methods for the past three years appears below: 2013 2014 2015 Completed-Contract $ 475,000 625,000 700,000 Percentage-of-Completion $ 900,000 700,000 1,050,000 Assuming an income tax rate of 40% for all years, what amount will be debited to Construction in Process account, to record the change at the beginning of 2015?
d. none UI ile dov. 23.During 2018, a construction company changed from the completed-contract method to the percentage- of-completion method for accounting purposes but not for tax purposes. Gross profit figures under both methods for the past three years appear below: Completed-Contract Percentage-of-Completion $ 800,000 2016 $ 475,000 950,000 2017 625,000 2018 1.050,000 700.000 S1.800.000 $2.800.000 Assuming an income tax rate of 40% for all years, the effect of this accounting change on prior periods should be reported by a...
Headland Construction Company began work on a $419,400 construction contract in 2017. During 2017, Headland incurred costs of $280,200, billed its customer for $216,300 and collected $174,500. At December 31, 2017, the estimated additional costs to complete the project total $161,600. Prepare Headland's journal entry to record proft or loss, if any, using (a) the percentage-of-completion method and (b) the completed-contract method. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is...
Exercise 18-36 Coronado Construction Company uses the percentage-of-completion method of accounting. In 2017, Coronado began work under contract #E2-D2, which provided for a contract price of $2,234,000. Other details follow: 2017 2018 Costs incurred during the year $615,980 $1,420,000 Estimated costs to complete, as of December 31 1,005,020 -0- Billings to date 413,000 2,234,000 Collections during the year 351,000 1,530,000 What portion of the total contract price would be recognized as revenue in 2017? In 2018? Revenue recognized in 2017...