On January 1, 2021, Monster Company changed to the percentage of completion method of income recognition for financial statement reporting but not for income tax reporting. Monster can justify this change in accounting policy. As of December 31, 2020, Monster compiled data showing that income under the completed contract method aggregated P700,000. If the percentage of completion method had been used, the accumulated income through December 31, 2020 would have been P880,000. Assuming an income tax rate of 35% for all years, the cumulative effect of this accounting change that should be reported by Monster in 2021 shall be: a. Accumulated profits statement as a P180,000 credit adjustment to the beginning balance b. Income statement as a P180,000 credit c. Accumulated profits statement as a P117,000 credit adjustment to the beginning balance d. Income statement as a P117,000 debit
On January 1, 2021, Monster Company changed to the percentage of completion method of income recognition for financial statement reporting but not for income tax reporting. Monster can justify this change in accounting policy. As of December 31, 2020, Monster compiled data showing that income under the completed contract method aggregated P700,000. If the percentage of completion method had been used, the accumulated income through December 31, 2020 would have been P880,000. Assuming an income tax rate of 35% for all years, the cumulative effect of this accounting change that should be reported by Monster in 2021 shall be:
a.
b. Income statement as a P180,000 credit
c. Accumulated profits statement as a P117,000 credit adjustment to the beginning balance
d. Income statement as a P117,000 debit
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
