Cherokee Construction Company changed from the cost-recovery to the percentage-of-completion method of accounting for long-term construction contracts during 2019. For tax purposes, the company employs the cost-recovery method and will continue this approach in the future. The appropriate information related to this change is as follows.

Instructions
a. Assuming that the tax rate is 35%, what is the amount of net income that would be reported in 2019?
b. What entry(ies) is necessary to adjust the accounting records for the change in accounting policy?

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Pretax Income from Percentage-of-Completion Cost-Recovery Difference $780,000 $610,000 $170,000 2018 2019 700,000 480,000 220,000