At the beginning of 2017, Sage Construction Company changed from the completed-c

Question

At the beginning of 2017, Sage 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 2017, pretax income under the two methods was as follows: percentage-of-completion $114,200, and completed-contract $79,400. The tax rate is 40%.

Prepare Sage’s 2017 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.)

Account Titles and Explanation

Debit

Credit

Account Titles and Explanation

Debit

Credit

Explanation / Answer

Account titles and explanation Debit Credit Construction in Process($114,200 - $79,400) $34,800 Deferred tax liability($34,800 * 40%) $13,920 Retained earnings $20,880

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.