During 2013 a construction company changed from the

Reference no: EM13593207

During 2013, a construction company changed from the completed-contract method to the percentage-of-completion method for accounting purposes but not for tax purposes. Fross profit figures under both methods for the past three years appear below:

Completed-Contract Percentage-of-completion

2011 $475,000 $700,000

2012 625,000 950,000

2013 700,000 1,050,000

$1,800,000 $2,700,000

Assuming an income tax rate of 40% for all years, the affect of this accounting change on prior periods should be reported by a credit of:

a. $540,000 on the 201 income statement

b. $330,000 on the 2013 income statement

c. $540,000 on the 2013 retained earnings statement

d. $330,000 on the 2013 retained earnings statement

Reference no: EM13593207

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