Homework Help is Here – Start Your Trial Now!
Business
Accounting
During 19X1 and 19X2, Company B used the percentage- of-completion method of accounting for construction. At the beginning of 19X3 it decides to switch to the completed-contract method (for both book and tax purposes). Under this method income before taxes would have been $100,000 lower for both years combined. (a) What type of change is this? (b) What type of approach does this change require: retroactive, or prospective? (c) Prepare the required entry for 19X3. Assume a tax rate for all years of 20%.

During 19X1 and 19X2, Company B used the percentage- of-completion method of accounting for construction. At the beginning of 19X3 it decides to switch to the completed-contract method (for both book and tax purposes). Under this method income before taxes would have been $100,000 lower for both years combined. (a) What type of change is this? (b) What type of approach does this change require: retroactive, or prospective? (c) Prepare the required entry for 19X3. Assume a tax rate for all years of 20%.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

Nn.140.

Subject  :- Account 

During 19X1 and 19X2, Company B used the percentage- of-completion method of accounting for construction. At the beginning of 19X3 it decides to switch to the completed-contract method (for both book and tax purposes). Under this method income before taxes would have been $100,000 lower for both years combined. (a) What type of change is this? (b) What type of approach does this change require: retroactive, or prospective? (c) Prepare the required entry for 19X3. Assume a tax rate for all years of 20%.
Transcribed Image Text:During 19X1 and 19X2, Company B used the percentage- of-completion method of accounting for construction. At the beginning of 19X3 it decides to switch to the completed-contract method (for both book and tax purposes). Under this method income before taxes would have been $100,000 lower for both years combined. (a) What type of change is this? (b) What type of approach does this change require: retroactive, or prospective? (c) Prepare the required entry for 19X3. Assume a tax rate for all years of 20%.
Expert Solution
steps

Step by step

Solved in 3 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Tax loss carryovers
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS