Sandhill Inc., a real estate developing company, was accounting for its long-term contracts using the completed contract method prior to 2021. In 2021, it changed to the percentage-of-completion method. The company decided to use the same for income tax purposes. The tax rate enacted is 40%. Income before taxes under both the methods for the past three years appears below. 2019 2020 2021 Completed contract $490000 $324000 $158000 Percentage-of-completion 790000 407000 310000 What amount will be debited to Construction in Process account, to record the change at beginning of 2021?
Sandhill Inc., a real estate developing company, was accounting for its long-term contracts using the completed contract method prior to 2021. In 2021, it changed to the percentage-of-completion method. The company decided to use the same for income tax purposes. The tax rate enacted is 40%. Income before taxes under both the methods for the past three years appears below. 2019 2020 2021 Completed contract $490000 $324000 $158000 Percentage-of-completion 790000 407000 310000 What amount will be debited to Construction in Process account, to record the change at beginning of 2021?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Sandhill Inc., a real estate developing company, was accounting for its long-term contracts using the completed contract method prior to 2021. In 2021, it changed to the percentage-of-completion method.
The company decided to use the same for income tax purposes. The tax rate enacted is 40%. Income before taxes under both the methods for the past three years appears below.
| 2019 | 2020 | 2021 | ||||
| Completed contract | $490000 | $324000 | $158000 | |||
| Percentage-of-completion | 790000 | 407000 | 310000 |
What amount will be debited to Construction in Process account, to record the change at beginning of 2021?
Expert Solution
Step 1
Given that:
Method = Percentage of completion method
Tax rate = 40%
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