Question
During 2014, AM Construction Company changed from the completed-contract method to the percentage-of-completion method for accounting purposes but not for tax purposes. Gross profit figures
During 2014, AM Construction Company changed from the completed-contract method to the percentage-of-completion method for accounting purposes but not for tax purposes. Gross profit figures under both methods for the past three years appear below:
Completed-Contract Percentage-of-Completion
2012 $ 400,000 $ 800,000
2013 600,000 900,000
2014 700,000 1,000,000
$1,700,000 $2,700,000
Assume an income tax rate of 35% for all years.
Show computations to determine the adjustment needed in 2014 to the beginning balance of retained earnings to account for the effect of this accounting change on prior periods.
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Intermediate Accounting principles and analysis
Authors: Terry d. Warfield, jerry j. weygandt, Donald e. kieso
2nd Edition
471737933, 978-0471737933
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