Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

On January 1, 2017, Girdwood Inc. has decided to change its revenue recognition policy from the completed-contract to the percentage-of-completion method to align its policies

image text in transcribed

On January 1, 2017, Girdwood Inc. has decided to change its revenue recognition policy from the completed-contract to the percentage-of-completion method to align its policies with current industry reporting standards. The following is information regarding the completed-contract and percentage-of-completion methods: 2015 2016 2017 Completed-contract revenue $ 15,000 $ 55,000 $ 23,000 Percentage-of-completion revenue 25,000 70,000 28,000 Income before tax, completed-contract basis 65,000 70,000 60,000 Opening retained earnings, completed-contract basis 150,000 180,000 200,000 The income tax rate for each of the 3 years is 40%. Assume any tax difference due to change in amortization expense policy is a temporary difference. Dividends for 2017 are $10,000. Required: a. Restate and prepare the Statement of Stockholders' for 2015-2017, assuming the change in policy is to be applied retroactively. b. Prepare the journal entry to properly reflect the accounting change in 2017. On January 1, 2017, Girdwood Inc. has decided to change its revenue recognition policy from the completed-contract to the percentage-of-completion method to align its policies with current industry reporting standards. The following is information regarding the completed-contract and percentage-of-completion methods: 2015 2016 2017 Completed-contract revenue $ 15,000 $ 55,000 $ 23,000 Percentage-of-completion revenue 25,000 70,000 28,000 Income before tax, completed-contract basis 65,000 70,000 60,000 Opening retained earnings, completed-contract basis 150,000 180,000 200,000 The income tax rate for each of the 3 years is 40%. Assume any tax difference due to change in amortization expense policy is a temporary difference. Dividends for 2017 are $10,000. Required: a. Restate and prepare the Statement of Stockholders' for 2015-2017, assuming the change in policy is to be applied retroactively. b. Prepare the journal entry to properly reflect the accounting change in 2017

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Comparative International Accounting

Authors: Christopher Nobes, Robert B Parker

12th Edition

0273763792, 978-0273763796

More Books

Students also viewed these Accounting questions

Question

=+How is CSR different from strategic CSR?

Answered: 1 week ago