Prepare the journal entry to record the accounting change

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Problem 1 - On January 1, 2011, Denozzo Builders evaluated its long-term construction contracts and decided to change them from the completed contract method of accounting to the percentage-of-completion method. Denozzo Builders will then use the completed contract solely for tax purposes. The tax rate is 40%. The following table provides the relevant data concerning the change:

Income before        Income Tax

Year

% of Completion

Completed Contract

Before 2010

$600,000

$400,000

2010

$500,000

$300,000

2011

$450,000

$400,000

Prepare the Journal Entry to record the accounting change.

Problem 2 - The Tildy Company bought a bulldozer for $120,000 on Jan 1, 2009. They have been recording depreciation based upon the sum-of-the-years-digits according to a five year useful life and no salvage value for the bulldozer. On January 1, 2011, Tildy switched to the straight line method of depreciation. The estimate life is the same and so is the salvage value.

1. Prepare the appropriate journal entry, if any, to record the accounting change.

2. Prepare the journal entry to record the depreciation expense for 2011.

Reference no: EM132013627

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