Cullen Construction Company, which began operations in 2020, changed from the completed contract to the percentage of completion method of accounting for long term construction contracts during 2021 For tax purposes, the company employs the completed contract 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 20 , what is the amount of net income that would be reported in 2021 b What entry(ies) are necessary to adjust the accounting records for the change in accounting principle Pretax Income from Completed Contract Percentage of Completion Difference $880,000 $590,000 480,000 $290,000 420,000 2020 2021 900,000

Question: Cullen Construction Company, which began operations in 2020, changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2021. For

Cullen Construction Company, which began operations in 2020, changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2021. For tax purposes, the company employs the completed-contract method and will continue this approach in the future. The appropriate information related to this change is as follows.

Pretax Income from Completed-Contract Percentage-of-Completion Difference $880,000 $590,000 480,000 $290,000 420,000 2020

Instructions

a. Assuming that the tax rate is 20%, what is the amount of net income that would be reported in 2021?

b. What entry(ies) are necessary to adjust the accounting records for the change in accounting principle?

Pretax Income from Completed-Contract Percentage-of-Completion Difference $880,000 $590,000 480,000 $290,000 420,000 2020 2021 900,000

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