Blossom Tar and Gravel Ltd. operates a road construction business. In its first year of operations, the company won a contract to build a road for the municipality of Cochrane West. It is estimated that the project will be completed over a three-year period starting in June 2023. Blossom uses the percentage-of-completion method of recognizing revenue on its long-term construction contracts. For tax purposes, and in order to postpone the tax on such revenue for as long as possible, Blossom uses the completed-contract method allowed by the CRA. For the second year of operations, Blossom made progress on the construction of the road for the municipality. The account balances at December 31, 2024, for the construction project and the accounting and tax balances of accounts related to the equipment used for construction follow. (The balances at December 31, 2023, are also listed.) 2024 2023 Accounts Receivable $105,100 $320,100 Asset/Liability (net of billings to date of $820,100 and $400,100) 120,200 100,100 Revenue from Long-Term Contracts 440,100 500,200 Construction Expenses 410,100 350,200 Equipment Accumulated Depreciation-Equipment 1,100,100 1,100,100 460,100 170,100 Undepreciated Capital Cost 620,100 979,975 Blossom's tax rate was 25% in 2023 and 2024. The enacted tax rate for 2025 and subsequent years was reduced to 20% on September 15, 2024. Income before income tax for the year ended December 31, 2023, was $195,100 and for December 31, 2024, was $120,200. Blossom reports under IFRS. (a) Prepare the journal entry to record the effect of the change in the enacted tax rate. (List debit entry before credit entry. Credit account titles are automatically indented when the 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. Round answers to O decimal places, e.g. 5,275.) Date Account Titles and Explanation September 15, 2024 Debit Credit
Blossom Tar and Gravel Ltd. operates a road construction business. In its first year of operations, the company won a contract to build a road for the municipality of Cochrane West. It is estimated that the project will be completed over a three-year period starting in June 2023. Blossom uses the percentage-of-completion method of recognizing revenue on its long-term construction contracts. For tax purposes, and in order to postpone the tax on such revenue for as long as possible, Blossom uses the completed-contract method allowed by the CRA. For the second year of operations, Blossom made progress on the construction of the road for the municipality. The account balances at December 31, 2024, for the construction project and the accounting and tax balances of accounts related to the equipment used for construction follow. (The balances at December 31, 2023, are also listed.) 2024 2023 Accounts Receivable $105,100 $320,100 Asset/Liability (net of billings to date of $820,100 and $400,100) 120,200 100,100 Revenue from Long-Term Contracts 440,100 500,200 Construction Expenses 410,100 350,200 Equipment Accumulated Depreciation-Equipment 1,100,100 1,100,100 460,100 170,100 Undepreciated Capital Cost 620,100 979,975 Blossom's tax rate was 25% in 2023 and 2024. The enacted tax rate for 2025 and subsequent years was reduced to 20% on September 15, 2024. Income before income tax for the year ended December 31, 2023, was $195,100 and for December 31, 2024, was $120,200. Blossom reports under IFRS. (a) Prepare the journal entry to record the effect of the change in the enacted tax rate. (List debit entry before credit entry. Credit account titles are automatically indented when the 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. Round answers to O decimal places, e.g. 5,275.) Date Account Titles and Explanation September 15, 2024 Debit Credit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Blossom Tar and Gravel Ltd. operates a road construction business. In its first year of operations, the company won a contract to build
a road for the municipality of Cochrane West. It is estimated that the project will be completed over a three-year period starting in
June 2023. Blossom uses the percentage-of-completion method of recognizing revenue on its long-term construction contracts. For
tax purposes, and in order to postpone the tax on such revenue for as long as possible, Blossom uses the completed-contract method
allowed by the CRA. For the second year of operations, Blossom made progress on the construction of the road for the municipality.
The account balances at December 31, 2024, for the construction project and the accounting and tax balances of accounts related to
the equipment used for construction follow. (The balances at December 31, 2023, are also listed.)
2024
2023
Accounts Receivable
$105,100
$320,100
Asset/Liability (net of billings to date of $820,100 and $400,100)
120,200
100,100
Revenue from Long-Term Contracts
440,100
500,200
Construction Expenses
410,100
350,200
Equipment
Accumulated Depreciation-Equipment
1,100,100 1,100,100
460,100
170,100
Undepreciated Capital Cost
620,100
979,975
Blossom's tax rate was 25% in 2023 and 2024. The enacted tax rate for 2025 and subsequent years was reduced to 20% on
September 15, 2024. Income before income tax for the year ended December 31, 2023, was $195,100 and for December 31, 2024,
was $120,200. Blossom reports under IFRS.
(a)
Prepare the journal entry to record the effect of the change in the enacted tax rate. (List debit entry before credit entry. Credit
account titles are automatically indented when the 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. Round answers to O decimal places, e.g. 5,275.)
Date Account Titles and Explanation
September
15, 2024
Debit
Credit
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