Wertz Corporation decided at the beginning of 2012 to change from the completed-

Question

Wertz Corporation decided at the beginning of 2012 to change from the completed-contract method to the percentage-of-completion method for financial reporting purposes. The company will continue to use completed-contract method for tax purposes. For years prior to 2012, pre-tax income under the two methods was as follows: percentage-of-completion  $125,700, and completed-contract $55,200. The tax rate is 32%. Prepare Wertz's 2012 journal entry to record the change in accounting principle. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

Description Debit Credit Construction RevenueConstruction in ProcessRetained EarningsDeferred Tax AssetAccounts PayableCost of Goods SoldTax ExpenseAccounts ReceivableDeferred Tax Liability $        Tax ExpenseRetained EarningsAccounts ReceivableConstruction in ProcessConstruction RevenueAccounts PayableCost of Goods SoldDeferred Tax AssetDeferred Tax Liability $        Deferred Tax AssetDeferred Tax LiabilityCost of Goods SoldTax ExpenseAccounts PayableConstruction RevenueConstruction in ProcessRetained EarningsAccounts Receivable $ Wertz Corporation decided at the beginning of 2012 to change from the completed-contract method to the percentage-of-completion method for financial reporting purposes. The company will continue to use completed-contract method for tax purposes. For years prior to 2012, pre-tax income under the two methods was as follows: percentage-of-completion $125,700, and completed-contract $55,200. The tax rate is 32%. Prepare Wertz's 2012 journal entry to record the change in accounting principle.

Explanation / Answer

Hi,

Please find the answer as follows:

The only mistake in my last response was , that I didnot listed the figures from high to low. Please check the answer now.

Construction in Progress (125700 - 55200) Dr. 70500

Retained Earnings (70500 - 22560) Cr. 47940

Deferred Tax Liability ((125700 - 55200)*.32) Cr. 22560

Thanks.

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