Tamarisk Construction Company changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2021. 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 2020 2021 $727,000 644,000 $561,000 $166,000 450,000 194,000 (a) Assuming that the tax rate is 40%, what is the amount of net income that would be reported in 2021? Net income $ (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 manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)
Tamarisk Construction Company changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2021. 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 2020 2021 $727,000 644,000 $561,000 $166,000 450,000 194,000 (a) Assuming that the tax rate is 40%, what is the amount of net income that would be reported in 2021? Net income $ (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 manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter3: Taxes On The Financial Statements
Section: Chapter Questions
Problem 11P
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Transcribed Image Text:Tamarisk Construction Company changed from the completed-contract to the percentage-of-completion method of accounting for
long-term construction contracts during 2021. 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
2020
$727,000
$561,000
$166,000
2021
644,000
450,000
194,000
(a) Assuming that the tax rate is 40%, what is the amount of net income that would be reported in 2021?
Net income
$
(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 manually. If no entry is required, select "No Entry" for the account titles and
enter O for the amounts.)
Account Titles and Explanation
Debit
Credit
eTextbook and Media
List of Accounts
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