On January 1, 2017, Girdwood Inc. has decided to change its revenue recognition policy from the completed-contract to the percentage-of-completion method to align its policies with current industry reporting standards. The following is information regarding the completed-contract and percentage-of-completion methods: 2015 2016 2017 Completed-contract revenue $ 15,000 $ 55,000 $ 23,000 Percentage-of-completion revenue 25,000 70,000 28,000 Income before tax, completed-contract basis 65,000 70,000 60,000 Opening retained earnings, completed-contract basis 150,000 180,000 200,000 The income tax rate for each of the 3 years is 40%. Assume any tax difference due to change in amortization expense policy is a temporary difference. Dividends for 2017 are $10,000. Required: Restate and prepare the Statement of Stockholders’ Equity for 2015-2017, assuming the change in policy is to be applied retroactively. Prepare the journal entry to properly reflect the accounting change in 2017.
On January 1, 2017, Girdwood Inc. has decided to change its revenue recognition policy from the completed-contract to the percentage-of-completion method to align its policies with current industry reporting standards. The following is information regarding the completed-contract and percentage-of-completion methods: 2015 2016 2017 Completed-contract revenue $ 15,000 $ 55,000 $ 23,000 Percentage-of-completion revenue 25,000 70,000 28,000 Income before tax, completed-contract basis 65,000 70,000 60,000 Opening retained earnings, completed-contract basis 150,000 180,000 200,000 The income tax rate for each of the 3 years is 40%. Assume any tax difference due to change in amortization expense policy is a temporary difference. Dividends for 2017 are $10,000. Required: Restate and prepare the Statement of Stockholders’ Equity for 2015-2017, assuming the change in policy is to be applied retroactively. Prepare the journal entry to properly reflect the accounting change in 2017.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
On January 1, 2017, Girdwood Inc. has decided to change its revenue recognition policy from the completed-contract to the percentage-of-completion method to align its policies with current industry reporting standards.
The following is information regarding the completed-contract and percentage-of-completion methods:
|
|
2015 |
2016 |
2017 |
|
Completed-contract revenue |
$ 15,000 |
$ 55,000 |
$ 23,000 |
|
Percentage-of-completion revenue |
25,000 |
70,000 |
28,000 |
|
Income before tax, completed-contract basis |
65,000 |
70,000 |
60,000 |
|
Opening |
150,000 |
180,000 |
200,000 |
The income tax rate for each of the 3 years is 40%. Assume any tax difference due to change in amortization expense policy is a temporary difference. Dividends for 2017 are $10,000.
Required:
- Restate and prepare the Statement of
Stockholders’ Equity for 2015-2017, assuming the change in policy is to be applied retroactively. - Prepare the
journal entry to properly reflect the accounting change in 2017.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education