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What entries are necessary to adjust the accounting records

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Reference no: EM131813742

Question - Choice Two Manufacturing, which began operations in 2011, changed from the completed contract to the percentage-of-completion method of accounting for long-term construction contracts during 2012. For tax purposes, the company employs the completed-contract method and will continue this approach in the future. (Hint: Adjust all tax consequences through the Deferred Tax Liability account.) The appropriate information related to this change is as follows.

Pretax income from

Percentage-of-Completion Completed-Contract Difference

2011 $680,000 $500,000 $180,000

2012 600,000 560,000 40,000

Instructions:

a) Assuming that the tax rate is 40%, what is the amount of net income that would be reported in 2012?

b) What entry(ies) are necessary to adjust the accounting records for the change in accounting principle?

Reference no: EM131813742

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