Wertz Corporation decided at the beginning of 2010 to change from the completed-contract method to the percentage-of-completion method for financial reporting purposes. The company will continue to use completed-contract method for tax purposes. For years prior to 2010, pre-tax income under the two methods was as follows: percentage-of-completion $120,000, and completed-contract $80,000. The tax rate is 35%. Prepare Wertz's 2010 journal entry to record the change in accounting principle. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2.)
Description Debit Credit
Construction in Process $
Retained Earnings $
Deferred Tax Liability $
Construction in process 40,000 ...
The solution provides the complete journal entry needed to record the change in accounting principle for Wertz Corporation.