ion 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 $117,000, and completed-contract $78,390. The tax rate is 20%. Prepare Martinez'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 O for the amounts) Account Titles and Explanation Investment Revenue Deferred Tax Liability Retained Earnings Debit Credit

ion 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 $117,000, and completed-contract $78,390. The tax rate is 20%. Prepare Martinez'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 O for the amounts) Account Titles and Explanation Investment Revenue Deferred Tax Liability Retained Earnings Debit Credit

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter16: Accounting Periods And Methods

Section: Chapter Questions

Problem 44P

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How do the all events and economic performance requirements apply to the following transactions by an accrual basis taxpayer? a. The company guarantees its products for six months. At the end of 2019, customers had made valid claims for 600,000 that were not paid until 2020. Also, the company estimates that another 400,000 in claims from 2019 sales will be filed and paid in 2020. b. The accrual basis taxpayer reported 200,000 in corporate taxable income for 2019. The state income tax rate was 6%. The corporation paid 7,000 in estimated state income taxes in 2019 and paid 2,000 on 2018 state income taxes when it filed its 2018 state income tax return in March 2019. The company filed its 2019 state income tax return in March 2020 and paid the remaining 5,000 of its 2019 state income tax liability. c. An employee was involved in an accident while making a sales call. The company paid the injured victim 15,000 in 2019 and agreed to pay the victim 15,000 a year for the next nine years.
Koolman Construction Company began work on a contract in 2019. The contract price is 3,000,000, and the company determined that its performance obligation was satisfied over time. Other information relating to the contract is as follows: Required: 1. Compute the gross profit or loss recognized in 2019 and 2020. 2. Prepare the appropriate sections of the income statement and ending balance sheet for each year.
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.
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.
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.
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
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ABC Inc. began operations on July 1,2019. The company recognizes income from long term construction contracts under the percentage of completion method in its financial statements and under the cost recovery method for income tax purposes. Income under each are as follows: 2019 Cost recovery- P 0 % of completion- P 700,000 2020 Cost recovery- P 800,000 % of completion- P 1,280,000 2021 Cost recovery- P 1,350,000 % of completion- P 1,700,000 The income tax rate was 32% for 2019. Based on a new law, for years after 2019, the tax rate is 34%. There are no other temporary differences. ABC should report in its December 31,2021 a deferred tax liability of
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?