(Change in PrincipleLong-term Contracts) Black Hoe Construction changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2015. 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

2014 $125,000 $ 25,000 $100,000

2015 360,000 200,000 160,000

INSTRUCTIONS:

(a) Assuming that the tax rate is 40%, what is the amount of net income that would be reported in 2015?

(b) What entry(ies) are necessary to adjust the accounting records for the change in accounting principle?