Problem:
Bryant Construction Company changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2010. 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
2009 $980,000 $730,000 250,000
2010 900,000 480,000 420,000
Instructions
Q1. Assuming that the tax rate is 40%, what is the amount of net income that would be reported in 2010? $
Q2. What entry is necessary to adjust the accounting records for the change in accounting principle? (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)