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E22.6 (LO 1) (Change in Principle-Long-Term Contracts) Cullen Construction Company, which began operations in 2020, changed from the completed-contract to the percentage-of-completion method of accounting
E22.6 (LO 1) (Change in Principle-Long-Term Contracts) Cullen Construction Company, which began operations in 2020, changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2021. Por 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. Difference Pretax Income from Percentage-of-Completion Completed-Contract $880,000 $590,000 900,000 480,000 2020 2021 $290,000 420,000 Instructions a. Assuming that the tax rate is 20%, what is the amount of net income that would be reported in 2021? b. What entry(ies) are necessary to adjust the accounting records for the change in accounting principle
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