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Pam Erickson Construction Company 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
Pam Erickson Construction Company 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. (Hint: Adjust all tax consequences through the Deferred Tax Liability account.) The appropriate information related to this change is as follows.
Pretax Income from: | |||
Percentage-of-Completion | Completed-Contract | Difference | |
2014 | $780,000 | $590,000 | $190,000 |
2015 | 700,000 | 480,000 | 220,000 |
(a)Assuming that the tax rate is35%, what is the amount of net income that would be reported in 2015?
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