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Make journal entry to reflect accounting change in the year

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Reference no: EM132972325

Cascade Alais Inc. (CA) has used the completed-contract method to account for long-term construction contracts since its inception in 2018. In 2020, CA decided to change to the percentage-of-completion method because it is the industry norm. CA previously used the completed-contract method for income tax purposes and will continue to do so. Its income tax rate is 20%.

The following lists CA 's income under each of the two income recognition methods:

Year ended December 31
Income before taxes                                               2018                 2019              2020
Completed-contract method (reported)              $ 80,000          $ 120,000    $ 170,000
Percentage-of-completion method(calculated)   $ 100,000          $ 150,000   $ 200,000

Required:

Problem 1: Make the journal entry to reflect the accounting change in 2020, the year of the change.

Reference no: EM132972325

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