Choice Two Manufacturing Company changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2014. 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.

Instructions
(a) Assuming that the tax rate is 40%, what is the amount of net income that would be reported in 2014?
(b) What entry(ies) are necessary to adjust the accounting records for the change in accountingprinciple?

Pretax Income from: 2013 2014 Percentage-of-Completion $680,000 600,000 Completed-Contract Difference $180,000 40,000 $500,000 560,000