Dream Home Inc., a real estate developing company, was accounting for its long-term contracts using the completed contract method prior to 2021. In 2021, it changed to the percentage-of-completion method.

The company decided to use the same for income tax purposes. The tax rate enacted is 30%.

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

2019 2020 2021

Completed contract $450,000 $300,000 $150,000

Percentage-of-completion 750,000 375,000 270,000

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

		A debit to Retained Earnings for $300,000
		A credit to Retained Earnings for $300,000
		A credit to Retained Earnings for $400,000
		A debit to Retained Earnings for $400,000