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Cullen Construction Company, which began operations in 2014, changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2015. For

Cullen Construction Company, which began operations in 2014, 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

percentage-of-completion completed contract difference

2014 880000 590000 290000

2015 900000 480000 420000 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 principles?

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