At the beginning of 2025, Whispering Construction Company changed from the cost-recovery method to recognizing revenue overtime (percentage-of-completion) for financial reporting purposes. The company will continue to use the cost-recovery method for taxpurposes. For years prior to 2025, pretax income under the two methods was as follows: percentage-of-completion $101,000, andcost-recovery $62,620. The tax rate is 20%.Prepare Whispering's 2025 journal entry to record the change in accounting principle. (Credit account titles are automatically indentedwhen the 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.List all debit entries before credit entries.)Account Titles and ExplanationDebitCredit

A journal entry in accounting is a documentation of a business's financial transaction. It entails…

Answered: At the beginning of 2025, Whispering…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter18: Accounting For Income Taxes

Section: Chapter Questions

Problem 13P

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Prior to and during 2019, Shadrach Company reported tax depreciation at an amount higher than the amount of financial depreciation, resulting in a book value of the depreciable assets of 24,500 for financial reporting purposes and of 20,000 for tax purposes at the end of 2019. In addition, Shadrach recognized a 3,500 estimated liability for legal expenses in the financial statements during 2019; it expects to pay this liability (and deduct it for tax purposes) in 2023. The current tax rate is 30%, no change in the tax rate has been enacted, and the company expects to be profitable in future years. What is the amount of the net deferred tax liability at the end of 2019? a. 300 b. 450 c. 1,050 d. 1,350
At the beginning of 2025, Pronghorn Construction Company changed from the cost-recovery method to recognizing revenue over time (percentage-of-completion) for financial reporting purposes. The company will continue to use the cost- recovery method for tax purposes. For years prior to 2025, pretax income under the two methods was as follows: percentage-of-completion $114,200, and cost-recovery $78,200. The tax rate is 40%. Pronghorn has a profit-sharing plan, which pays all employees a bonus at year-end based on 2% of pretax income. Compute the indirect effect of Pronghorn's change in accounting principle that will be reported in the 2025 income statement, assuming that the profit-sharing contract explicitly requires adjustment for changes in income numbers. Indirect effect
At the beginning of 2020, Bramble Construction Company changed from the completed-contract method to recognizing revenue over time (percentage-of-completion) for financial reporting purposes. The company will continue to use the completed-contract method for tax purposes. For years prior to 2020, pretax income under the two methods was as follows: percentage-of-completion $114,200, and completed-contract $78,200. The tax rate is 40%. Bramble has a profit-sharing plan, which pays all employees a bonus at year-end based on 2% of pretax income.Compute the indirect effect of Bramble’s change in accounting principle that will be reported in the 2020 income statement, assuming that the profit-sharing contract explicitly requires adjustment for changes in income numbers. Indirect effect $enter the Indirect effect in dollars
At the beginning of 2020, Wertz Construction Company changed from the completed-contract method to recognizing revenue over time (percentage-of-completion) for financial reporting purposes. The company will continue to use the completed-contract method for tax purposes. For years prior to 2020, pretax income under the two methods was as follows: percentage-of-completion $120,000, and completed-contract $80,000. The tax rate is 20%. Prepare Wertz's 2020 journal entry to record the change in accounting principle.
At the beginning of 2020, Buffalo Construction Company changed from the completed-contract method to recognizing revenue over time (percentage-of-completion) for financial reporting purposes. The company will continue to use the completed-contract method for tax purposes. For years prior to 2020, pretax income under the two methods was as follows: percentage-of-completion $100,000, and completed-contract $60,000. The tax rate is 20%.Prepare Buffalo’s 2020 journal entry to record 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 0 for the amounts.)
At the beginning of 2020, Wertz Construction Company changed from the completed-contract method to recognizing revenue over time (percentage-of-completion) for financial reporting purposes. The company will continue to use the completed- contract method for tax purposes. For years prior to 2020, pretax income under the two methods was as follows: percentage-of- completion $120,000, and completed-contract $80,000. The tax rate is 20%. Prepare Wertz's 2020 journal entry to record the change in accounting principle.
Skysong IT Consulting changed from the recognition overtime (percentage-of-completion) to the completed-contract method for financial reporting purposes. The company will continue to use the completed-contract method for tax purposes. For years prior to 2017, pretax income under the two methods was as follows: percentage-of-completion $214,000, and completed-contract $156,000. The tax rate is 30%. Prepare Skysong IT’s 2017 journal entry to record the change in accounting principle.
On January 1, 2024, Hampton's Construction, Inc. decided to change from the completed-contract method of accounting to the percentage-of-completion method. Hampton will continue to use the completed-contract method for income tax purposes. The following information is available for net income. The income tax rate for all years is 35%.Net Income Year Ended Percentage of Completion Completed Contract December 31, 2022 $145,000 $125,000 December 31, 2023 179,000 159,000 December 31, 2024 267,000 181,000 What is the journal entry to record the change in accounting principle on January 1, 2024? Group of answer choices Retained Earnings 55,900 Deferred Tax Asset 30,100 Construction in Progress86,000 Construction in Progress 40,000 Retained Earnings 40,000 No entry needed. Construction in Progress 40,000 Deferred Tax Liability 14,000 Retained Earnings26,000
Homer Alaska Inc. (HA) has used the completed-contract method to account for long-term construction contracts since its inception in 2018. In 2020, HA decided to change to the percentage-of-completion method because it is the industry norm. HA previously used the completed-contract method for income tax purposes and will continue to do so. Its income tax rate is 20%. The following lists HA’s income under each of the two income recognition methods: Year ended December 31 Income before taxes 2018 2019 2020 Completed-contract method (reported) $ 80,000 $ 120,000 $ 170,000 Percentage-of-completion method(calculated) $ 100,000 $ 150,000 $ 200,000 Required: Prepare the journal entry to reflect the accounting change in 2020, the year of the change.
On December 31, 2022, Dodd, Inc. appropriately changed the company's method of accounting for long-term construction contracts from the percentage-of-completion method to the cost recovery method for financial statement and income tax purposes. The change will result in a €2,300,000 decrease in the beginning Construction in Process at January 1, 2022. Assume a 30% income tax rate. The cumulative effect of this accounting change on the Deferred Tax Liability account is Group of answer choices 1) a decrease of €690,000. 2) an increase of €690,000. 3) a decrease of €1,610,000. 4)an increase of €2,300,000.
During 2021, a construction company that began operations in 2019 changed from the completed-contract method to the percentage-of-completion method for accounting purposes but not for tax purposes. Gross profit figures under both methods for the past three years appear below: Completed-Contract Percentage-of-Completion 2019 $ 385000 $ 790000 2020 525000 850000 2021 600000 950000 $1510000 $2590000 Assuming an income tax rate of 30% for all years and that comparative statements are not issued, the effect of this accounting change on prior periods should be reported by a increase of $511000 on the 2021 income statement. $755000 on the 2021 retained earnings statement. $511000 on the 2021 retained earnings statement. $755000 on the 2021 income statement.
Cullen Construction Company, which began operations in 2020, 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. The appropriate information related to this change is as follows. Pretax Income from Percentage-of-Completion Completed-Contract Difference 2020 $880,000 $590,000 $290,000 2021 900,000 480,000 420,000 Instructions a. Assuming that the tax rate is 20%, what is the amount of net income that would be reported in 2021? b. What entry(ies) are necessary to adjust the accounting records for the change in accounting principle?

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