Larkspur 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. Pretax Income from: Percentage-of-Completion Completed-Contract Difference 2020 $735,000 $564,000 $171,000 2021 651,000 440,000 211,000 (a) Assuming that the tax rate is 40%, what is the amount of net income that would be reported in 2021? Net income $Enter the net income in dollars (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 0 for the amounts.) Account Titles and Explanation Debit Credit Enter an account title Enter a debit amount Enter a credit amount Enter an account title Enter a debit amount Enter a credit amount Enter an account title Enter a debit amount Enter a credit amount
Larkspur 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. Pretax Income from: Percentage-of-Completion Completed-Contract Difference 2020 $735,000 $564,000 $171,000 2021 651,000 440,000 211,000 (a) Assuming that the tax rate is 40%, what is the amount of net income that would be reported in 2021? Net income $Enter the net income in dollars (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 0 for the amounts.) Account Titles and Explanation Debit Credit Enter an account title Enter a debit amount Enter a credit amount Enter an account title Enter a debit amount Enter a credit amount Enter an account title Enter a debit amount Enter a credit amount
Chapter12: Tax Credits And Payments
Section: Chapter Questions
Problem 23P
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Larkspur 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.
|
Pretax Income from:
|
||||||
|---|---|---|---|---|---|---|
|
Percentage-of-Completion
|
Completed-Contract
|
Difference
|
||||
|
2020
|
$735,000 | $564,000 | $171,000 | |||
|
2021
|
651,000 | 440,000 | 211,000 |
(a) Assuming that the tax rate is 40%, what is the amount of net income that would be reported in 2021?
| Net income | $Enter the net income in dollars |
(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 0 for the amounts.)
|
Account Titles and Explanation
|
Debit
|
Credit
|
|---|---|---|
|
Enter an account title
|
Enter a debit amount
|
Enter a credit amount
|
|
Enter an account title
|
Enter a debit amount
|
Enter a credit amount
|
|
Enter an account title
|
Enter a debit amount
|
Enter a credit amount
|
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