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?

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