choose the correct answer

Use the following information for questions 19 and 20.

Dream Home Inc., a real estate developing company, was accounting for its long-term contracts using the completed contract method prior to 2015. In 2015, it changed to the percentage-of-completion method.

The company decided to use the same for income tax purposes. The tax rate enacted is 40%.

Income before taxes under both the methods for the past three years appears below.

2013 2014 2015

Completed contract $300,000 $200,000 $100,000

Percentage-of-completion 500,000 250,000 180,000

19. What amount will be debited to Construction in Process account, to record the change at beginning of 2015?

a. $250,000

b. $100,000

c. $150,000

d. $50,000

20. Which of the following will be included in the journal entry made by Dream Home to record the income effect?

a. A debit to Retained Earnings for $150,000

b. A credit to Retained Earnings for $150,000

c. A credit to Retained Earnings for $100,000

d. A debit to Retained Earnings for $100,000