Reference no: EM131633129

Question - Ivanhoe Construction Company, which began operations in 2017, changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2018. For tax purposes, the company employs the completed-contract method and will continue this approach in the future. The appropriate information related to this change is as follows.

                                            Pretax Income from                  

Percentage-of-Completed            Completed-Contract                       Difference

2017 $897,000                            $611,000                                  $286,000

2018  $986,000                           528,000                                     458,000

2018 $986000

(a) Assuming that the tax rate is 40%, what is the amount of net income that would be reported in 2018?

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