Wertz Construction Company decided at the beginning of 2014 to change from the c

Question

Wertz Construction Company decided at the beginning of 2014 to change from the completed-contract method to the percentage-of-completion method for financial reporting purposes. The company will continue to use the completed-contract method for tax purposes. For years prior to 2014, pretax income under the two methods was as follows: percentage-of-completion $107,000, and completed-contract $76,000. The tax rate is 31%. Prepare Wertz's 2014 journal entry to record the change in accounting principle.

Explanation / Answer

Date Account Titles Debit Credit $ $ January 2014 Construction in process 31,000 Deferred tax liability 9,610 Retained earnings 21,390

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