Prepare the journal entries necessary

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Before the current year, the company accounted for its income from long-term construction contracts on the completed-contract basis. Early this year, the company changed to the percentage-of-completion basis for accounting purposes but continues to use the completed-contract method for tax purposes. Income for the current year has been recorded using the new method. Prior year tax effects must be considered. The following information is available.

Pretax Income
Percentage-of-Completion
$320,000
$140,000

Prepare the journal entries necessary at December 31, 2012, to record the corrections and changes made to date related to the information provided. The books are still open for 2012. The income tax rate is 35%. The company has not yet recorded its 2012 income tax expense and payable amounts so current-year tax effects may be ignored.

Reference no: EM13135874

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