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    Change in Principle-Long-term Contracts

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    Bryant Construction Company changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2010. 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
    2009 $980,000 $730,000 250,000
    2010 900,000 480,000 420,000

    Instructions

    (a) Assuming that the tax rate is 40%, what is the amount of net income that would be reported in 2010? $

    (b) What entry is necessary to adjust the accounting records for the change in accounting principle? (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)

    Description Debit Credit
    $
    $
    $

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    https://brainmass.com/business/change-management/change-in-principle-long-term-contracts-406307

    Solution Preview

    The rule is that this is a change in principle and should be reported retrospectively. That is, you go back and change prior years. So, the difference for the prior years will be booked to the ...

    Solution Summary

    Your tutorial explains the rule and then gives the responses requested.

    $2.19

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