Exercise 22-1 Sheridan Construction Company changed from the completed-contract

Question

Exercise 22-1 Sheridan Construction Company 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. (Hint: Adjust all ax consequences through the Deferred Tax Liability account.) The appropriate information related to this change is as follows. Pretax Income from: Percentage-of- Completed- Completion Contract Difference $647,000 $67,000 512,000 130,000 $714,000 642,000 2017 2018 (a) Assuming that the tax rate is 30%, what is the amount of net income that would be reported in 2018? Net income s (b) What entry is necessary to adjust the accounting records for the change in accounting principle? (Credit account titles are automatically indented when amount is entered. Do not indent amounts.) Account Titles and Explanation manually. If no entry is required, select "No Entry" for the account titles and enter o for the Debit Credit Question Attempts: o of 2 used

Explanation / Answer

answer .. A

answer ..b

construction in process deferred tax liability ( 67000 * 30 % )

retained earnings ( 67000 * 70% )

20100 46900

income before income tax 642000 less ; income tax expense 30 % 192600 net income 449400

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