In 2019, Bergeron Construction Company Ltd. applied the completedcontract method of accounting for long-term construction contracts. However, in 2020, Bergeron discovered that the percentage-of-completion method should have been applied instead. For tax purposes, the company uses the completed-contract method and will continue this approach in the future. Bergeron follows ASPE, and will apply the percentage-of-completion method in 2020 and in the future. Bergeron applies the deferred taxes method of accounting for income taxes, and is subject to a tax rate of 30%. The appropriate information related to this change is as follows: 

Instructions

a. Calculate the net income to be reported in 2020. 

b. Provide the necessary entry(ies) in 2020 to adjust the accounting records with respect to the revenue recognition method applied in 2019. 

c. Assume that, as at the end of 2020, just prior to recording the entry(ies) in part (b), Bergeron has a current ratio of 0.95. From the perspective of a creditor, discuss the effect of the entry(ies) in part (b) on Bergeron's current ratio.

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Pre-Tax Income Using: Percentage-of-Completion Completed-Contract Difference 2019 $820,000 $620,000 $200,000 2020 700,000 480,000 220,000