Sheridan 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. Completed contract Percentage-of-completion 2019 2020 2021 $415000 $279000 $143000 715000 347000 235000 Which of the following will be included in the journal entry made by Sheridan to record the income effect? a) A debit to Retained Earnings for $229,200. b) A credit to Retained Earnings for $208,200. c) A credit to Retained Earnings for $140,200. d) A debit to Retained Earnings for $140,200.

Sheridan 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. Completed contract Percentage-of-completion 2019 2020 2021 $415000 $279000 $143000 715000 347000 235000 Which of the following will be included in the journal entry made by Sheridan to record the income effect? a) A debit to Retained Earnings for $229,200. b) A credit to Retained Earnings for $208,200. c) A credit to Retained Earnings for $140,200. d) A debit to Retained Earnings for $140,200.

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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