Question - Ivanhoe 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-Completed Completed-Contract Difference
2017 $897,000 $611,000 $286,000
2018 $986,000 528,000 458,000
2018 $986000
(a) Assuming that the tax rate is 40%, what is the amount of net income that would be reported in 2018?
(b) What entry is necessary to adjust the accounting records for the change in accounting principle?