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Accounting
2014 2015 Pretax Income from Percentage-of-Completion $780,000 700,000 Cost-Recovery $610,000 480,000 Difference $170,000 220,000

2014 2015 Pretax Income from Percentage-of-Completion $780,000 700,000 Cost-Recovery $610,000 480,000 Difference $170,000 220,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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CHANGES IN ACCOUNTING POLICY Illustration: Cherokee Construction Company changed from the cost- recovery to the percentage-of-completion method of accounting for long-term construction contracts during 2015. For tax purposes, the company employs the cost-recovery 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. 2014 2015 Pretax Income from Percentage-of-Completion $780,000 700,000 Cost-Recovery $610,000 480,000 Difference $170,000 220,000
Transcribed Image Text:CHANGES IN ACCOUNTING POLICY Illustration: Cherokee Construction Company changed from the cost- recovery to the percentage-of-completion method of accounting for long-term construction contracts during 2015. For tax purposes, the company employs the cost-recovery 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. 2014 2015 Pretax Income from Percentage-of-Completion $780,000 700,000 Cost-Recovery $610,000 480,000 Difference $170,000 220,000
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