Brief Exercise 22-2 Your answer is incorrect. Try again., At the beginning of 20

Question

Brief Exercise 22-2 Your answer is incorrect. Try again., At the beginning of 2017, Sheridan 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 $128,200, and completed-contract tax rate is 35%. Sheridan has a profit-sharing plan, which pays all employees a bonus at year-end based on 1% of pretax income Compute the indirect effect of Sheridan's change in accounting principle that will be reported in the 2017 income statement, assuming that the profit-sharing contract explicitly requires adjustment for changes in income numbers. Indirect effect 33735

Explanation / Answer

The final answer will be $ 33397.65 because in the question it is given that the company pays bonus to the employees @ 1% on pre tax income. So the computation will be done as shown:-

1. $128,200 - $76,300. = $ 51,900

2. $51,900 - 1%(Bonus) = $ 51,381

3. $51,381 - 35%(Tax) = $ 33,397.65.

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

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