Swifty Construction Company changed from the completed-contract to the percentage-of-completion method of accounting for long- term construction contracts during 2021. For tax purposes, the company employs the completed-contract method and will continue this approach in the future. (Hint: Adjust all tax consequences through the Deferred Tax Liability account.) The appropriate information related to this change is as follows. 2020 2021 Pretax Income from: Percentage-of-Completion $750,000 Completed-Contract Difference $623,000 $127,000 674,000 518,000 156,000 (a) Assuming that the tax rate is 30%, what is the amount of net income that would be reported in 2021? Net income $ (b) What entry is necessary to adjust the accounting records for the change in accounting principle? (Credit account titles are automatically indented when 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.) Account Titles and Explanation Debit Credit
Swifty Construction Company changed from the completed-contract to the percentage-of-completion method of accounting for long- term construction contracts during 2021. For tax purposes, the company employs the completed-contract method and will continue this approach in the future. (Hint: Adjust all tax consequences through the Deferred Tax Liability account.) The appropriate information related to this change is as follows. 2020 2021 Pretax Income from: Percentage-of-Completion $750,000 Completed-Contract Difference $623,000 $127,000 674,000 518,000 156,000 (a) Assuming that the tax rate is 30%, what is the amount of net income that would be reported in 2021? Net income $ (b) What entry is necessary to adjust the accounting records for the change in accounting principle? (Credit account titles are automatically indented when 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.) Account Titles and Explanation Debit Credit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Swifty Construction Company changed from the completed-contract to the percentage-of-completion method of accounting for long-
term construction contracts during 2021. For tax purposes, the company employs the completed-contract method and will continue
this approach in the future. (Hint: Adjust all tax consequences through the Deferred Tax Liability account.) The appropriate
information related to this change is as follows.
2020
2021
Pretax Income from:
Percentage-of-Completion
$750,000
Completed-Contract
Difference
$623,000
$127,000
674,000
518,000
156,000
(a) Assuming that the tax rate is 30%, what is the amount of net income that would be reported in 2021?
Net income
$
(b) What entry is necessary to adjust the accounting records for the change in accounting principle? (Credit account titles are
automatically indented when 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.)
Account Titles and Explanation
Debit
Credit
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